Case 2:19-cv-13429-PDB-DRG ECF No. 84 filed 08/03/20 PageID.

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC,

GENERAL MOTORS COMPANY, No. 19-cv-13429

Plaintiffs, Honorable Paul D. Borman

against District Court Judge

FCA US LLC, FIAT CHRYSLER Honorable David R. Grand

AUTOMOBILES N.V., ALPHONS Magistrate Judge
IACOBELLI, JEROME DURDEN,
MICHAEL BROWN,

Defendants.

PLAINTIFFS’ MOTION TO ALTER OR AMEND JUDGMENT

Plaintiffs General Motors LLC and General Motors Company (collectively,

“GM”), pursuant to Federal Rule of Civil Procedure 59(e), submit this Motion to

Alter or Amend the Court’s Judgment and Opinion and Order in support (Dkts. 82-

83) granting with prejudice FCA US LLC’s Motion to Dismiss (Dkt. 41), Fiat

Chrysler Automobiles N.V.’s Motion to Dismiss (Dkt. 42), and Alphons Iacobelli’s

Motion to Dismiss (Dkt. 50).1

1
On August 3, 2020, GM’s counsel conferred with counsel for Defendants and all
oppose GM’s Motion.
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TABLE OF CONTENTS

Page
INTRODUCTION .....................................................................................................1

BACKGROUND .......................................................................................................3

A. Procedural History.................................................................................3

B. Newly Discovered Evidence Reinforces That Defendants’

Scheme Directly and Intentionally Targeted and Harmed GM ............5

ARGUMENT .............................................................................................................9

A. The Court Misapplied the Proximate Cause Requirement..................10

B. The Court Should Have Provided GM Leave to Amend. ...................13

C. Newly Discovered Evidence Warrants Amending the Judgment

to Permit GM to File the FAC.............................................................15

CONCLUSION ........................................................................................................22

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TABLE OF AUTHORITIES

Page(s)

CASES
Alexander v. Eagle Mfg. Co., LLC
714 F. App’x 504 (6th Cir. 2017 ....................................................................... 13

Anza v. Ideal Steel Supply Corp.,

547 U.S. 451 (2006). (Id. at 22.) ..................................................................passim

Bank v. Pitt,
928 F.2d 1108 (11th Cir. 1991) .......................................................................... 14

Belknap v. Bank of Am. Corp.,

No. 14-cv-1540, 2015 WL 1423398 (N.D. Ohio Mar. 27, 2015) ...................... 13

U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc.,

342 F.3d 634 (6th Cir. 2003) .............................................................................. 14

Bridge v. Phoenix Bond & Indem. Co.,

553 U.S. 639 (2008) ......................................................................................10, 11

In re ClassicStar Mare Lease Litig.,

727 F.3d 473 (6th Cir. 2013) ........................................................................11, 22

Counts v. Gen. Motors, LLC,

No. 16-cv-12541, 2018 WL 5264194 (E.D. Mich. Oct. 23, 2018) .................... 13

Davis v. United States,

No. CIV. 08-184-ART, 2010 WL 5014533 (E.D. Ky. Dec. 3, 2010) ................ 16

In re Duramax Diesel Litig.,

298 F. Supp. 3d 1037 (E.D. Mich. 2018) ........................................................... 15

Empress Casino Joliet Corp. v. Johnston,

763 F.3d. 723 (7th Cir. 2014) .......................................................................12, 16

Hemi Group, LLC v. City of New York,

559 U.S. 1 (2010) ..................................................................................4, 5, 11, 12

Holmes v. Sec. Inv’r Prot. Corp.,

503 U.S. 259 (1992) ......................................................................................10, 22
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Intera Corp. v. Henderson,

428 F.3d 605 (6th Cir. 2005) ................................................................................ 9

KBT Grp., LLC v. City of Eastpointe,

No. 18-10409, 2019 WL 1556194 (E.D. Mich. Apr. 10, 2019) ......................... 13

Mich. Dep’t of Envtl. Quality v. City of Flint,

296 F. Supp. 3d 842 (E.D. Mich. 2017) .......................................................18, 19

Murphy v. Vaive Wood Prod. Co.,

No. 2:17-CV-11513, 2019 WL 117337 (E.D. Mich. Jan. 7, 2019) ..............16, 18

Raymo v. FCA US LLC,

No. 2:17-CV-12168, 2020 WL 4366061 (E.D. Mich. July 30,
2020) ................................................................................................................... 14

Schwartz v. Sun Co., Inc. (R & M),

276 F.3d 900 (6th Cir. 2002) .............................................................................. 12

SNAPP, Inc. v. Ford Motor Co.,

532 F.3d 496 (6th Cir. 2008) ................................................................................ 9

Trollinger v. FTyson Foods, Inc.,

370 F.3d 602, 615 (6th Cir. 2004) ...................................................................... 11

Wallace v. Midwest Fin. & Mortg. Servs., Inc.,

714 F.3d 414 (6th Cir. 2013) ..............................................................4, 10, 11, 15

STATUTES
18 U.S.C. § 1964(c) ................................................................................................. 10

RULES
Fed. R. Civ. P. 9(b) .................................................................................................. 14

Fed. R. Civ. P. 15(a)...........................................................................................13, 15

Fed. R. Civ. P. 59(e)................................................................................................... 9

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CONCISE STATEMENT OF ISSUES PRESENTED

1. “A court may grant a Rule 59(e) motion to alter or amend if there is,”

inter alia, a clear error of law or newly discovered evidence. Intera Corp. v.

Henderson, 428 F.3d 605, 620 (6th Cir. 2005). This Court’s Order granting

Defendants’ motions to dismiss applied a “strict proximate cause requirement” that

cannot be reconciled with the “flexible” proximate cause standard set forth in

binding Supreme Court and Sixth Circuit precedent and dismissed GM’s Complaint

with prejudice even though leave to amend should have been freely granted.

Moreover, GM has discovered new and previously unavailable facts that address

every concern the Court raised in its Order. Should the Court grant GM’s Motion

under Rule 59(e), alter or amend its Judgment, and allow GM to file an amended

complaint?

GM Answers: Yes

Defendants Answer: No

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STATEMENT OF CONTROLLING
OR MOST APPROPRIATE AUTHORITIES

1. Federal Rule of Civil Procedure 59(e)

2. U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634 (6th Cir.
2003)

3. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008)

4. In re ClassicStar Mare Lease Litig., 727 F.3d 473 (6th Cir. 2013)

5. Wallace v. Midwest Fin. & Mortg. Servs., Inc., 714 F.3d 414 (6th Cir.
2013)

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INTRODUCTION
Since July 2017, three former officials of FCA US LLC (“FCA”) and ten

former officials of the United Automobile, Aerospace and Agricultural Implement

Workers of America (“UAW”) have pleaded guilty to a years-long bribery scheme

to corrupt the auto industry’s collective bargaining process, enrich themselves,

and—as GM later learned—harm GM, one of FCA’s principal competitors and the

target of FCA’s scheme to skew the collective bargaining process to GM’s

detriment. In an understandable reaction to this confessed pattern of unlawful

racketeering activity that intentionally and directly inflicted economic harm upon it,

GM brought this lawsuit, alleging, inter alia, claims under the RICO Act. As a result

of the Court’s orders in this case, including but not limited to its Opinion and Order

granting Defendants’ motions to dismiss (“Order”), GM has not been permitted to

pursue the evidence underlying its valid RICO claims and will be prevented from

doing so unless and until that decision is set aside or overturned. For the

extraordinarily compelling reasons set forth herein, GM respectfully submits that the

Court’s Judgment and Order must be set aside and vacated because: (1) the facts

alleged by GM in its Complaint and set forth in the Order more than adequately state

a claim against all Defendants under RICO; and (2) newly discovered evidence,

outlined herein and set forth in detail in the attached proposed First Amended

Complaint (Ex. A, “FAC”), further demonstrates the validity of GM’s RICO claims
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and amply justifies vacating or at the very least amending the Order to remove its

with prejudice effect and allow GM to file the FAC.

In rendering Judgment, the Court applied a “strict proximate cause

requirement” that cannot be reconciled with the “flexible” proximate cause standard

set forth in binding Supreme Court and Sixth Circuit precedent. Taken as true and

in the light most favorable to GM, the allegations in GM’s original Complaint plainly

satisfy the correct legal standard. But even if this Court’s strict proximate cause

standard were the appropriate legal standard, the Court committed manifest error by

dismissing GM’s claims with prejudice and denying GM the opportunity to file an

amended complaint to address the Court’s concerns. As the proposed FAC

demonstrates, GM’s newly discovered facts (among other new allegations), obtained

without the aid of formal discovery, easily satisfy the Court’s strict proximate cause

standard. The proposed FAC demonstrates that Defendants’ racketeering scheme

intentionally, directly, and proximately targeted and harmed GM, as bribes were paid

to individuals working within GM, who then stashed them in secret overseas

accounts. At a bare minimum, the Court should give GM an opportunity to amend

its Complaint to present these new allegations and otherwise try to cure the defects

the Court identified.

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BACKGROUND

A. Procedural History

GM filed the Complaint on November 20, 2019, on the heels of more than a

dozen guilty pleas involving Defendants and their co-conspirators. (See Dkt. 1.) GM

alleged that Defendants engaged in a years-long, unlawful conspiracy through which

FCA and Fiat Chrysler Automobiles N.V. (“FCA NV”) secretly bribed officials at

the UAW—committing multiple violations of the Taft-Hartley Act and multiple acts

of wire fraud and mail fraud along the way—to raise GM’s labor costs while

lowering the costs to FCA. The Complaint alleged that GM was not just an incidental

victim of a scheme by FCA to enrich itself at the union’s expense, but the direct and

intended victim of a scheme to harm GM.

Although GM promptly served written discovery pursuant to the Court’s

standing order to try to obtain further evidence substantiating the allegations in the

Complaint, Defendants refused to respond to GM’s requests, and the Court

ultimately stayed all of GM’s discovery requests pending resolution of Defendants’

motions to dismiss. (Dkt. 55; see Dkts. 41, 42, 50.) The Court heard oral argument

on those motions on June 23, 2020. Two weeks later, after having already declined

to exercise jurisdiction over GM’s state-law claims, and after the Sixth Circuit had

stayed the case for seven days while it decided GM’s mandamus petition, the Court

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issued its Order and Judgment dismissing GM’s RICO claims with prejudice. (See

Dkts. 82, 83.)

The Court “[a]ssum[ed] without deciding that Defendants did commit” the

alleged RICO violations. (Id. at 18; see Dkt. 1 ¶¶ 156-89.) Nevertheless, it granted

the motions based solely on the conclusion that “GM’s alleged injuries were not

proximately caused by Defendants’ alleged violations of the RICO Act.” (Dkt. 82 at

2-3.) In reaching that conclusion, the Court declined “to rely on the proximate cause

analysis in the Sixth Circuit’s decision in Wallace v. Midwest Fin. & Mortg. Servs.,

Inc., 714 F.3d 414 (6th Cir. 2013),” which post-dated all relevant Supreme Court

precedent. (Id. at 20.) According to the Court, “the Supreme Court has never adopted

th[e] proximate cause standard” the Sixth Circuit applied in Wallace, but rather “has

made clear, time and again, that the RICO proximate cause requirement does not

turn on foreseeability.” (Id. at 21.) The Court thus not only declined to follow

Wallace, but applied a self-described “strict proximate cause requirement” that it

erroneously deemed was required by Hemi Group, LLC v. City of New York, 559

U.S. 1 (2010), and Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006). (Id. at 22.)

Under this new “strict” standard, the Court determined that “[n]either” of GM’s “two

separate theories of causation” was supported by “sufficient facts.” (Id. at 23-30.)

Yet rather than permit GM an opportunity to rectify that perceived deficiency in its

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pleadings by permitting it to file an amended complaint, the Court dismissed GM’s

Complaint with prejudice. (Id. at 30.)

B. Newly Discovered Evidence Reinforces That Defendants’ Scheme

Directly and Intentionally Targeted and Harmed GM

While GM believes the facts set forth in its original Complaint are more than

sufficient to state RICO claims against Defendants, GM has recently learned of

reliable information that demonstrates that Defendants’ racketeering scheme was

directly and intentionally designed to, and did, harm GM.

Specifically, GM has discovered and alleges in the attached FAC the use by

Defendants and other co-conspirators of a broad network of foreign bank accounts

containing millions of dollars in countries such as Switzerland, Luxembourg,

Liechtenstein, Italy, Singapore, the Cayman Islands, and others. (FAC ¶ 9.) Among

the beneficiaries of these accounts and participants in the scheme to directly harm

GM are former UAW Vice President Joseph Ashton, who, before joining GM’s

Board as the UAW Trust’s designee in 2014, denied GM cost-cutting labor

advantages provided to FCA; former UAW President Dennis Williams, who forced

$1 billion in additional costs on GM beyond the UAW’s Presidential Demand

through the 2015 collective bargaining agreement; and Defendant Alphons Iacobelli,

who left FCA in 2015 and subsequently joined GM. (Id. ¶¶ 5-9, 14-20, 35, 39-43.)

The existence and use of these foreign accounts have never come to light publicly

and by their very design were intended to remain secretive from criminal

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investigation. (Id. ¶¶ 35, 37, 43, 63, 201(j).) This previously hidden network of

accounts, utilized by Defendants and controlled in part by individuals purportedly

acting on GM’s behalf, reveals a magnitude of bribery and illegal activity

specifically targeting GM that was not previously known or reasonably knowable.

First, the existence of these foreign accounts for this grouping of U.S. (and

one Canadian) citizens strongly supports the conclusion that not only did FCA target

GM but did so in part through having Ashton act clandestinely on FCA’s behalf from

inside GM’s Boardroom. (Id. ¶¶ 6, 8, 126, 179.) As UAW Vice President for the GM

Department from 2010 to 2014 and UAW Vice President General Holiefield’s

counterpart, Ashton negotiated the 2011 collective bargaining agreement. (Id. ¶ 88.)

Ashton was therefore at the center of negotiations that resulted in Defendants

causing the UAW to increase GM’s labor costs by denying GM the same labor

advantages that FCA received. (Id. ¶¶ 42, 126, 157, 177.) And in 2014, Ashton

joined GM’s Board as the UAW Trust’s designee. (Id. ¶¶ 6, 126.)

Ashton’s role in those negotiations and on GM’s Board take on a very

different meaning—and one consistent with a scheme intended not just to help FCA,

but to harm GM—now that GM has come to reasonably believe and has alleged as

fact that Ashton maintained at least one account in the Cayman Islands at the same

time that Defendants were making unlawful payments to try to grease the skids with

the UAW. (Id. ¶¶ 43, 88.) This newly discovered evidence gives rise to a far-more-

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than-plausible inference that Ashton operated as a paid mole inside GM’s

Boardroom during 2015 collective bargaining negotiations and FCA NV’s merger

effort from his position as the UAW Trust nominee to GM’s Board, providing

Defendants confidential details about GM’s labor strategy and analysis of a potential

merger so Defendants could not only cause but maximize the harm to GM. (Id. ¶¶ 8,

126, 179-80.) On information and belief, Ashton not only protected high-level FCA

and FCA NV executives but also fed FCA and FCA NV confidential information

related to the collective bargaining process in order to weaken GM. (Id. ¶ 43.) GM’s

FAC therefore adds Ashton as a Defendant and explains in further detail how

Defendants’ scheme was intended and designed to harm GM. (See id. ¶¶ 41-43, 88,

126, 175-84.)

These newly discovered and pled facts also shed new light on the relationship

between former UAW President Dennis Williams and Ashton. GM always knew that

Williams handpicked Ashton to serve on GM’s Board. (Id. ¶ 6.) But newly

discovered and alleged facts make clear that the FCA Defendants likely provided

funds to both Ashton and Williams via foreign accounts in furtherance of

Defendants’ RICO activities. (Id. ¶¶ 9, 40, 43, 100.) This newly discovered evidence

supports additional inferences regarding Williams’ decision to place Ashton on

GM’s Board. (Id. ¶¶ 8, 175-84.) Upon information and belief, FCA and FCA NV

rewarded Williams with significant funds placed in bank accounts in Switzerland

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and Liechtenstein in exchange for intentionally infiltrating GM, both to impose

asymmetrical costs on GM through the 2015 collective bargaining agreement and to

pressure GM to merge with FCA NV. (Id. ¶ 40.) Based on the revelation that

Williams was secretly compensated for participating in the scheme, GM’s FAC adds

Williams as a Defendant. (See id. ¶¶ 39-40.)

Finally, newly discovered facts support the inference that former FCA Vice

President Iacobelli, who GM had previously named as a Defendant, also furthered

FCA NV’s scheme to target GM for increased labor costs and a merger from inside

GM. (Id. ¶ 7.) After Iacobelli left FCA in June 2015, he solicited employment from

GM and, once employed, furthered Defendants’ scheme by funneling inside

information to Defendants. (Id. ¶¶ 7, 137, 182-83.) Upon information and belief,

FCA and FCA NV secretly provided Iacobelli and a family member with millions

of dollars through funds currently in accounts in Italy, Liechtenstein, Switzerland,

and Singapore not only for his central and long-running role in the scheme, but also

for protecting high-level FCA and FCA NV executives, which he did even after he

signed up to cooperate with the criminal investigation and pleaded guilty to

conspiracy to violate the Labor Management Relations Act and filing a false tax

return. (Id. ¶ 35.) As alleged based on reasonable inference, Iacobelli curtailed his

criminal plea to ensure that the true scope of the conspiracy was not revealed, which

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included the plan by FCA NV to use its control of the UAW to directly target and

harm GM and its use of foreign bank accounts as bribes.

In sum, GM’s newly discovered facts confirm that Defendants’ racketeering

scheme directly targeted and harmed GM (id. ¶ 184):

ARGUMENT
“A court may grant a Rule 59(e) motion to alter or amend if there is: (1) a

clear error of law; (2) newly discovered evidence; (3) an intervening change in

controlling law; or (4) a need to prevent manifest injustice.” Intera Corp. v.

Henderson, 428 F.3d 605, 620 (6th Cir. 2005); see also SNAPP, Inc. v. Ford Motor

Co., 532 F.3d 496, 507 (6th Cir. 2008) (“[W]e allow a district court discretion to set

aside a prior judgment under Rule 59(e) and permit an amended complaint to be filed

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under such circumstances.”). At least three bases for amending the judgment exist

here.

A. The Court Misapplied the Proximate Cause Requirement.

First, the Court applied an unduly strict proximate cause standard that is

inconsistent with governing Supreme Court and Sixth Circuit precedent.

A plaintiff bringing a civil RICO claim must establish that he was “injured in

his business or property by reason of a violation of section 1962 of this chapter.” 18

U.S.C. § 1964(c). “The phrase ‘by reason of’ in RICO’s private right of action

provision, requires proof that the defendant’s violation of § 1962 was both the ‘but

for’ and the ‘proximate cause’ of the plaintiff’s injury.” (Dkt. 82 at 19 (quoting

Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 265, 268 (1992)).) The Supreme

Court has admonished, however, that “[p]roximate cause … is a flexible concept that

does not lend itself to ‘a black-letter rule that will dictate the result in every case.’”

Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 654 (2008) (quoting Holmes,

503 U.S. at 272 n.20). The Sixth Circuit has likewise rejected the notion that

§ 1964(c) demands a “[s]trict application of traditional proximate-cause

considerations” such as directness. Wallace v. Midwest Fin. & Mortg. Servs., Inc.,

714 F.3d 414, 419 (6th Cir. 2013).

Despite these (and other) precedents, the Court based its Opinion on the

premise that the “proximate cause requirement” in civil RICO cases is “strict,” and

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that any kinks in an otherwise straight-line chain of direct causation mean that

proximate cause is necessarily lacking. (Dkt. 82 at 22; see id. at 23-25.) That

mistaken raising of the bar to show proximate cause alone justifies altering or

amending the judgment. To be sure, “[f]oreseeability of the injury alone cannot

satisfy the RICO proximate cause inquiry” (id. at 19 (emphasis added)), as a scheme

to enrich the conspirators with only an incidental, but foreseeable effect on others

may be insufficient. See In re ClassicStar Mare Lease Litig., 727 F.3d 473, 487 (6th

Cir. 2013). But the Sixth Circuit has been unequivocal that a civil RICO plaintiff

“need only show that [1] the defendants’ wrongful conduct was ‘a substantial and

foreseeable cause’ of the injury and [2] the relationship between the wrongful

conduct and the injury is ‘logical and not speculative,’” id. (emphasis added)

(quoting Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 615 (6th Cir. 2004)), and

neither Hemi nor Anza holds otherwise. Thus, a scheme that intentionally and

purposefully targets another for harm causes injury that is both foreseeable and

sufficient to show proximate cause. See Wallace, 714 F.3d at 420 (“Once we accept

that Wallace was an intended target of the defendants’ alleged scheme …—as we

must at this stage in the litigation—the link between the scheme and the type of

injury Wallace suffered is plain to see.”). As the Supreme Court has underscored,

“[o]ne who intentionally causes injury to another is subject to liability to the other

for that injury.” Bridge, 553 U.S. at 657.

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GM’s Complaint, construed as it must be in the light most favorable to GM,

readily satisfied those standards. (See, e.g., Dkt. 1 ¶¶ 7, 71-72, 78-81, 83.) Unlike in

Anza, where the plaintiff’s damages were just an incidental byproduct of a tax fraud

designed to benefit the taxpayer, and the Court needed to undertake “a multi-step

analysis” to get from “defendants’ underpayment of taxes, to their reduced prices, to

the plaintiff’s loss of sales,” Empress Casino Joliet Corp. v. Johnston, 763 F.3d. 723,

733 (7th Cir. 2014), GM’s injuries were distinct, direct, and the whole point of the

scheme. Only GM incurred the higher labor costs resulting from the conspiracy.

Indeed, increased labor costs imposed on GM benefitted UAW workers. And unlike

in Hemi, where the plaintiffs’ theory of causation required the court to make

numerous logical leaps and jump “well beyond the first step,” 559 U.S. at 10, here,

finding that Defendants’ scheme caused GM harm requires no logical contortions or

multiple-step analysis. Defendants infiltrated GM and used their insider positions

and bribery scheme to impose increased costs on GM and thus benefit FCA.

Even if the UAW rank-and-file may have suffered some unidentified injuries

as a result of certain aspects of how Defendants carried out their unlawful scheme

—which GM does not concede—at best, GM’s injuries were distinct. Put another

way, the UAW rank-and-file did not suffer from increased labor costs directly and

intentionally imposed on GM. That is more than enough at the 12(b)(6) stage. See,

e.g., Schwartz v. Sun Co., Inc. (R & M), 276 F.3d 900, 904 (6th Cir. 2002) (“Where

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there is evidence … that [the plaintiff’s] losses were a result of [the defendant’s]

conduct, as well as evidence which tends to show that [the plaintiff’s] losses were

attributable to other factors, it is normally up to the trier of fact to decide which is

the case.”); Counts v. Gen. Motors, LLC, No. 16-cv-12541, 2018 WL 5264194, at

*12 (E.D. Mich. Oct. 23, 2018) (“There is no reason why Bosch’s conduct cannot

have multiple ‘direct victims,’ including EPA, CARB, and the Plaintiffs.”).

B. The Court Should Have Provided GM Leave to Amend.

Even if this Court were correct to embrace a “strict” proximate cause standard,

it should have allowed GM leave to amend, rather than dismissing GM’s RICO

claims with prejudice. “[T]he Federal Rules of Civil Procedure ‘evince[] a liberal

amendment policy,’ by providing that the district court ‘should freely give leave [to

amend a complaint] when justice so requires.’” KBT Grp., LLC v. City of Eastpointe,

No. 18-10409, 2019 WL 1556194, at *2 (E.D. Mich. Apr. 10, 2019) (quoting

Alexander v. Eagle Mfg. Co., LLC 714 F. App’x 504 (6th Cir. 2017)); see Fed. R.

Civ. P. 15(a). The Sixth Circuit thus “has held that ‘where a more carefully crafted

complaint might state a claim, a plaintiff must be given at least one chance to amend

the complaint before the district court dismisses the action with prejudice’” “even if

plaintiff fails to file a motion to amend” before a court decides a motion to dismiss.

Belknap v. Bank of Am. Corp., No. 14-cv-1540, 2015 WL 1423398, at *3 (N.D. Ohio

Mar. 27, 2015) (quoting U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d

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634, 644 (6th Cir. 2003)). That is particularly true when a court applies a strict

pleading standard in circumstances where the strictness of the standard is unclear or

debatable. See Bledsoe, 342 F.3d at 644 (reversing decision dismissing complaint

with prejudice); Raymo v. FCA US LLC, No. 2:17-CV-12168, 2020 WL 4366061,

at *21 (E.D. Mich. July 30, 2020) (dismissing without prejudice RICO claim alleged

in amended complaint and providing an opportunity to replead).

Bledsoe is instructive. The district court there dismissed the complaint with

prejudice based on its conclusion, which was debatable under governing Circuit

precedent, that Rule 9(b)’s heightened pleading requirement governed the

allegations. Bledsoe, 342 F.3d at 644. The Sixth Circuit agreed that Rule 9(b)’s

demanding pleading standard applied but reversed the decision to dismiss with

prejudice rather than without prejudice. Because the plaintiff “was not definitively

on notice that he had to state his allegations with the specificity required by Rule

9(b),” the proper course was to “remand the case to the district court to allow [the

plaintiff] to comply with Rule 9(b) by amending his amended complaint.” Id. at 645.

The Court concluded by making clear that “where a more carefully drafted complaint

might state a claim, a plaintiff must be given at least one chance to amend the

complaint before the district court dismisses the action with prejudice.” Id. at 644

(quoting Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir. 1991)).

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The same conclusion follows here. As this Court acknowledged, there is at

least serious tension between the “strict” standard the Court deemed warranted and

the foreseeability and logical relationship standard set forth in Wallace and other

Sixth Circuit cases this Court criticized. Even if the Court was right to reject

application of the Sixth Circuit’s Wallace holding, the Court still should at least have

granted GM leave to amend to satisfy the “strict” proximate cause standard the Court

embraced.

Indeed, dismissal with prejudice here was inconsistent with Rule 15(a). This

Court concluded that the allegations that Defendants intended to harm GM were

“vague and conclusory” and lacking in “specific facts.” (E.g., Dkt. 82 at 27.)

Plaintiffs whose complaints are deemed to lack sufficient specificity are prime

candidates to be granted leave to amend under Rule 15(a)’s liberal policy, especially

when the supposed lack of specificity is in a fact-intensive area like proximate cause.

Cf., e.g., In re Duramax Diesel Litig., 298 F. Supp. 3d 1037, 1073 (E.D. Mich. 2018)

(“A challenge to a RICO suit based on asserted lack of proximate causation … is

often best resolved at summary judgment, not at the pleading stage.”).

C. Newly Discovered Evidence Warrants Amending the Judgment to

Permit GM to File the FAC.

In all events, even if setting aside the judgment on the pre-existing record were

not appropriate, GM should plainly be given leave to file its proposed FAC in light

of GM’s newly discovered and alleged evidence confirming GM’s status as an

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intended and direct victim of Defendants’ unlawful scheme. The FAC addresses

every concern the Court raised in its Order granting Defendants’ motions to dismiss.

Not only does the FAC contain new allegations tailored to the Court’s “strict”

proximate cause standard, but it also includes newly discovered evidence that even

more plainly substantiates the direct infliction of harm upon GM. The newly

discovered facts about Ashton, Williams, Iacobelli, and others provide a strong basis

to conclude that GM sat “in the center of the target of the conspiracy,” Empress

Casino, 763 F.3d at 733, as Defendants’ scheme infiltrated GM’s Boardroom where

GM’s highly confidential information could be provided to FCA through a bribed

Ashton in order to target and maximize harm to GM. (FAC ¶¶ 5-9, 175-84.)

These facts were not previously available and could not have been obtained

“through the exercise of reasonable diligence.” Davis v. United States, No. CIV. 08-

184-ART, 2010 WL 5014533, at *4 (E.D. Ky. Dec. 3, 2010); see Murphy v. Vaive

Wood Prod. Co., No. 2:17-CV-11513, 2019 WL 117337, at *7 (E.D. Mich. Jan. 7,

2019) (“Newly-discovered evidence is evidence that could not have been discovered

through reasonable diligence.”) (citation omitted). GM has been diligently

investigating Defendants’ racketeering scheme without the aid of formal discovery.

(See Ex. B, Declaration of Hariklia Karis (“Karis Decl.”) ¶¶ 5, 7; Ex. C, Declaration

of Jeffrey Willian (“Willian Decl.”) ¶¶ 5, 7.) Among other avenues of investigation,

GM and its counsel have conducted witness interviews, reviewed relevant publicly

16
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available information regarding criminal developments, closely monitored the

criminal proceedings against Defendants and their co-conspirators, reviewed and

analyzed internal GM documents and communications, engaged consultants, and

scrutinized collective bargaining negotiations and related agreements among GM,

FCA, and the UAW since 2009. (Karis Decl. ¶ 5; Willian Decl. ¶ 5.) After filing its

Complaint and consistent with the Court’s standing order governing all civil cases,

GM sought formal written discovery from FCA and FCA NV, Defendants, and third

parties to better understand the nature of the bribery scheme and the payments made

and received. Defendants refused to respond, and on February 18, 2020, the Court

stayed GM’s discovery requests. (See Dkt. 55.)

There was no indication from any of the sources GM had available to it that

Defendants had used offshore accounts to perpetuate and conceal their scheme

through payouts to Ashton (while on GM’s Board), Iacobelli (while a GM

employee), or Williams, a UAW President with significant control and power to

directly harm GM. (See Karis Decl. ¶ 6; Willian Decl. ¶ 6.) The payoffs through

these foreign accounts to Ron Gettelfinger (UAW President 2002-2010), Ashton,

and Williams further confirm the 1962(b) control that FCA exercised over the UAW.

As intended, this information was concealed and affirmatively disavowed even by

cooperating witnesses. Defendant Durden, for example, made representations

through counsel during his sentencing that he did not benefit from the scheme. (FAC

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¶¶ 37, 101(b).) To the contrary, Durden was secretly compensated through foreign

accounts in Liechtenstein and the Cayman Islands as part of Defendants’ scheme to

harm GM. (Id.) GM only recently uncovered reliable information regarding this

component of Defendants’ scheme—which, as explained, creates a more-than-

plausible inference that Defendants had insiders working to undermine GM’s

position vis-à-vis FCA’s. (See Karis Decl. ¶¶ 8, 10; Willian Decl. ¶¶ 8, 10.) GM

could not have obtained this information earlier despite reasonable diligence. (Karis

Decl. ¶ 11; Willian Decl. ¶ 11.); see Murphy, 2019 WL 117337, at *8.

New evidence “must be of such a nature as would probably produce a different

result” to warrant altering or amending the judgment. Mich. Dep’t of Envtl. Quality

v. City of Flint, 296 F. Supp. 3d 842, 846 (E.D. Mich. 2017) (internal quotation

marks and citation omitted). That standard is readily satisfied here, as the newly

discovered evidence is directly responsive to the Court’s concerns identified in its

Order. As the FAC demonstrates, an amended complaint would include additional

facts demonstrating how Defendants’ racketeering scheme was purposely designed

and implemented to (and did) directly harm GM.

For example, the Court, while recognizing the credibility of “GM’s first

causation theory, that Defendants engaged in a ‘pay-to-harm’ GM scheme,”

nevertheless rejected it in large part because the Complaint purportedly lacked

“specific facts supporting the allegation that a condition of Defendants’ payments to

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the UAW officials was denial of concessions and benefits to GM.” (Dkt. 82 at 24,

27.) The Court reasoned, “the only credible inference from the facts alleged in GM’s

complaint is that Defendants’ bribes were intended to secure advantages and

concessions for FCA,” rather than harm GM. (Id. at 27.) GM disputes that the

Complaint lacked adequate factual support. (See, e.g., Dkt. 1 ¶¶ 6, 71-72, 75, 78-79,

81 (allegations that FCA was provided labor advantages that, pursuant to the bribery

scheme, were denied to GM).) Even so, the newly discovered information provides

additional specific facts demonstrating that the scheme was designed to harm GM

“by causing its overall labor costs to increase as a result of the UAW purposefully

denying it certain structural programs . . . that would otherwise have been granted to

GM but for the bribery.” (FAC ¶ 11.)

The new information reveals that from 2010 to 2014, FCA and FCA NV likely

made substantial payments to Ashton—then UAW Vice President for the GM

Department—who effectively controlled labor relations with GM. (Id. ¶¶ 41-43.)

These payments “allowed Marchionne and FCA Group to ensure that Ashton

imposed higher costs on GM, rather than the same benefits it provided to FCA and

that it otherwise would have given GM under pattern bargaining but for the

racketeering scheme.” (Id. ¶ 88.) Indeed, there would have been no need to bribe the

leader of negotiations with GM if the scheme were only about benefiting FCA. These

facts therefore support GM’s new allegation that “Ashton used his influence to

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further FCA’s scheme designed to increase GM’s labor costs above market and

above FCA’s costs and directly harm GM by not granting GM the specific labor

concessions it should have otherwise received but for the bribes.” (Id. ¶ 42.) As one

example, Ashton ensured that, while the UAW committed to a “full fledged

partnership” with FCA in pursuing its World Class Manufacturing program, “the

UAW denied GM the same labor flexibility and use with respect to its manufacturing

operations.” (Id. ¶ 103.) Among other benefits denied to GM during Ashton’s tenure,

this denial directed by Ashton ensured “that GM had a higher cost structure than

Chrysler and later FCA” and “faced substantially above-market labor costs.” (Id. ¶

102.)

Moreover, the newly discovered evidence confirms that GM was the target of

Defendants’ scheme, as the scheme was directed not only through the UAW, but

also from payments to individuals within GM to maximize the direct harm to GM.

In exchange for substantial sums in foreign accounts, Defendants Ashton and

Iacobelli infiltrated GM, Ashton as director and Iacobelli as employee. (Id. ¶¶ 5-8,

35, 43, 175-84.) From their insider positions of trust, Ashton and Iacobelli could

gather and funnel highly confidential information to the FCA Defendants and their

co-conspirators at the UAW, including “confidential information [related to] GM’s

strategies and internal positions in connection with the 2015 CBA negotiations” and

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other “confidential information concerning GM’s labor approaches and strategies.”

(Id. ¶¶ 179, 183.)

This corporate espionage directly harmed GM—not FCA’s workers or anyone

else—through FCA’s orchestration of the scheme from within through a Board

member and high-ranking labor relations executive. The highly confidential

information Ashton and Iacobelli obtained allowed the UAW and FCA “to tailor

their approaches (both in labor negotiations and merger efforts) to inflict maximum

pressure on GM,” impose higher labor costs on GM, and ultimately attempt to force

a merger which, although rejected by GM, caused GM direct harm of over a billion

dollars in increased cost in the 2015 collective bargaining agreement, alone. (Id.

¶ 180.) None of that direct harm is contingent on other “steps” identified by the

Court. Theft of GM’s confidential information by Ashton and Iacobelli does not

depend on “bribes to secure the position of lead company in the 2015 CBA

negotiations,” FCA’s negotiation of a “very generous to UAW workers CBA with

the UAW,” or the imposition of terms on GM through pattern bargaining, and indeed

led to GM being forced to overpay UAW workers. (Dkt. 82 at 28.) In short, “[t]he

placement of Ashton and Iacobelli inside GM were part of the scheme to directly

target GM, causing GM to suffer direct harm” even though the merger never

materialized. (FAC ¶ 184.)

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The new allegations and newly discovered evidence alleged in GM’s

proposed FAC are more than adequate to establish the “‘direct relation between the

injury asserted and the injurious conduct alleged’” necessary to plead a civil RICO

claim. In re ClassicStar, 727 F.3d at 487 (quoting Holmes, 503 U.S. at 268). At a

minimum, they provide ample ground for this Court to amend its Judgment and

Order to allow GM to file the FAC.

CONCLUSION
For the foregoing reasons, GM respectfully requests that the Court grant its

Motion, and at the very least allow GM to file the attached proposed FAC.

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Dated: August 3, 2020 Respectfully submitted,

HONIGMAN LLP

By: /s/ Jeffrey K. Lamb

Jeffrey K. Lamb (P76738)
J. Michael Huget (P39150)
Shirin S. Goyal (P82528)
2290 First National Building
660 Woodward Avenue
Detroit, MI 48226
Telephone: (313) 465-7000
jlamb@honigman.com
mhuget@honigman.com
sgoyal@honigman.com

KIRKLAND & ELLIS LLP

By: /s/ Hariklia Karis

Hariklia Karis, P.C.
Jeffrey Willian, P.C.
300 North LaSalle
Chicago, IL 60654
Telephone: (312) 862-2000
hariklia.karis@kirkland.com
jeffrey.willian@kirkland.com

Austin Norris
333 South Hope Street
Los Angeles, CA 90071
Telephone: (213) 680-8400
austin.norris@kirkland.com

Attorneys for Plaintiffs General Motors LLC

and General Motors Company

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CERTIFICATE OF SERVICE
The undersigned certifies that all counsel of record who are deemed to have

consented to electronic service are being served with a copy of this document via the

Court’s CM/ECF system on August 3, 2020.

/s/ Jeffrey K. Lamb

Jeffrey K. Lamb

24
Case 2:19-cv-13429-PDB-DRG ECF No. 84-1 filed 08/03/20 PageID.3006 Page 1 of 2

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC,

GENERAL MOTORS COMPANY, No. 19-cv-13429

Plaintiffs, Honorable Paul D. Borman

against District Court Judge

FCA US LLC, FIAT CHRYSLER Honorable David R. Grand

AUTOMOBILES N.V., ALPHONS Magistrate Judge
IACOBELLI, JEROME DURDEN,
MICHAEL BROWN,

Defendants.

INDEX OF EXHIBITS
Case 2:19-cv-13429-PDB-DRG ECF No. 84-1 filed 08/03/20 PageID.3007 Page 2 of 2

Exhibit Document
A GM’s Proposed First Amended Complaint
B Declaration of Hariklia Karis
C Declaration of Jeffrey L. Willian
Case 2:19-cv-13429-PDB-DRG ECF No. 84-2 filed 08/03/20 PageID.3008 Page 1 of 129

Exhibit A
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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC, No. 19-cv-13429

GENERAL MOTORS COMPANY,
Honorable Paul D. Borman
Plaintiffs,
District Court Judge
against
Honorable David R. Grand
FCA US LLC, FIAT CHRYSLER Magistrate Judge
AUTOMOBILES N.V.,
DENNIS WILLIAMS, FIRST AMENDED COMPLAINT
JOSEPH ASHTON,
ALPHONS IACOBELLI, DEMAND FOR JURY TRIAL
JEROME DURDEN,
MICHAEL BROWN,

Defendants.
Case 2:19-cv-13429-PDB-DRG ECF No. 84-2 filed 08/03/20 PageID.3010 Page 3 of 129

TABLE OF CONTENTS

Page

INTRODUCTION ..................................................................................................1

THE PARTIES ..................................................................................................... 13

A. FCA Group ....................................................................................... 14

B. Corrupt FCA Officials ...................................................................... 15

C. Dennis Williams - Corrupted Former UAW Officer and

President ........................................................................................... 18

D. Joseph Ashton - Corrupt Former UAW Vice President and

UAW Trust Designated Director on GM’s Board ............................. 19

E. Significant Non-Parties and Other Entities ........................................ 20

FCA-UAW CONTROL ENTERPRISE ................................................................ 27

FCA-NTC ENTERPRISE ..................................................................................... 29

JURISDICTION AND VENUE ............................................................................ 31

DETAILED ALLEGATIONS .............................................................................. 33

I. OPERATION CHRYSLER: FIAT ACQUIRES OPERATING

CONTROL OF CHRYSLER FOR NO CASH ........................................... 33

A. Financial Crisis Threatens U.S. Auto Industry .................................. 33

B. Fiat and Marchionne Seek Entry into the U.S. Market Through
Chrysler ............................................................................................ 34

C. FCA Obtains the Right to Purchase a Majority of Chrysler’s

Shares from the UAW ....................................................................... 41

II. FCA FUNNELS MILLIONS TO THE UAW AND CERTAIN UAW

LEADERS. ................................................................................................. 42

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Case 2:19-cv-13429-PDB-DRG ECF No. 84-2 filed 08/03/20 PageID.3011 Page 4 of 129

III. FIAT AND ITS SUCCESSORS CORRUPTED FORMER UAW

LEADERS TO DAMAGE GM AND ACHIEVE LABOR PEACE
FOR FCA FOR YEARS. ............................................................................ 52

IV. FCA GROUP CONSPIRED WITH UAW LEADERS TO ATTEMPT

A TAKEOVER OF GM BY MERGER ...................................................... 59

A. Marchionne Prepares on Behalf of FCA to Force a Takeover of

GM by Merger .................................................................................. 60

B. President Williams and Defendant Ashton Are Key Players in

the Takeover Conspiracy .................................................................. 64

C. FCA Undertakes “Operation Cylinder” ............................................. 67

V. CO-CONSPIRATORS ASHTON AND IACOBELLI SERVED AS

INFORMANTS TO FCA CAUSING HARM TO GM. .............................. 84

VI. FCA NV’S HISTORIC CULTURE OF CORRUPTION AND

BRIBERY AS A BUSINESS TOOL. ......................................................... 88

VII. U.S. ATTORNEY IN DETROIT’S CRIMINAL INVESTIGATION

STARTS TO REVEAL THE CORRUPTION ............................................ 93

VIII. FCA GROUP AND ITS CO-CONSPIRATORS CONCEALED THE

CONSPIRACY AND RESULTING DAMAGE, PREVENTING GM
FROM DISCOVERING ITS EARLIER INJURY. ..................................... 94

CAUSES OF ACTION ....................................................................................... 106

REQUESTS FOR RELIEF ................................................................................. 124

ii
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AMENDED COMPLAINT
General Motors LLC and General Motors Company (individually or

collectively, “GM” or “Company”) for their Amended Complaint, allege as follows:

INTRODUCTION

1. This lawsuit is categorically not against the hard-working women and

men who are members of the International Union, United Automobile, Aerospace

and Agricultural Implement Workers of America (“UAW”). The UAW and its

current officials are not Defendants to this lawsuit. This lawsuit does not seek to alter

or reduce in any respect the wages and other benefits of any UAW worker in the past

or into the future. In fact, this lawsuit is intended to build a stronger future for GM’s

employees, the UAW, and the Company. That future depends on a collective

bargaining process and labor relations grounded in integrity, good faith, and

arm’s-length negotiations, which the law requires and this lawsuit is intended to

vindicate.

2. This case is about an Italian company, Fiat Chrysler Automobiles N.V.

(“FCA NV”), which managed to win the support of the U.S. government in obtaining

operational control, for no cash, over an iconic U.S. auto company, Chrysler Group

LLC. Shortly after this government approved acquisition, FCA Group 1 betrayed our

1
“FCA Group” means, collectively, FCA US LLC (“FCA”), its parent FCA NV,
along with their predecessors, including FCA predecessors Chrysler LLC and
Chrysler Group LLC (“Chrysler”) and FCA NV predecessor Fiat S.p.A. (“Fiat”).

1
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government’s and the U.S. auto industry’s trust and embarked on a systemic and

near decade-long conspiracy to bribe senior union officials to corrupt the collective

bargaining process and labor relations and directly harm GM. Only recently through

continued investigation during this lawsuit has GM learned, upon information and

belief, that this FCA-Group-perpetrated-scheme was significantly broader, even

more direct, and deeper than has been publicly revealed to date.

3. As initially revealed starting with the first indictment in July 2017, the

United States Attorney for the Eastern District of Michigan has been conducting a

wide-ranging investigation into corruption by and between FCA Group and certain

former union leaders. This investigation has resulted in criminal charges against

fourteen individuals with three FCA officials and ten former UAW officials (and

one UAW official’s spouse) pleading guilty to a years-long bribery scheme. As has

been repeatedly admitted, starting no later than July 2009, FCA paid millions of

dollars in “prohibited payments and things of value to UAW officers and UAW

employees” and the UAW itself including through the UAW-FCA joint training

center (the National Training Center or “NTC”) and, in return, received “benefits,

concessions, and advantages for FCA in the negotiation, implementation, and

“FCA Group” is not a term created by GM. It is consistent with how these
Defendants refer to themselves in public. See, e.g., fcagroup.com. Where
appropriate and distinguishable, the Complaint refers to the particular entity or
entities at issue.

2
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administration of the collective bargaining agreements between FCA and the

UAW.” 2 During the course of this audacious bribery scheme, two collective

bargaining agreements (“CBAs”) were negotiated with FCA—in 2011 and 2015—

both subject to corruption in those negotiations and the implementation such that

they directly harmed GM.

4. Through this lawsuit, GM seeks recourse against FCA Group and the

individuals responsible for this long-running bribery scheme. While a full

accounting of the damage inflicted from this scheme directly on GM is unknowable

at this time without discovering additional details of the scheme, GM estimates that

it has incurred massive monetary damage, on the order of billions of dollars (before

trebling) that an economist can readily calculate in the form of higher costs that were

unique to GM and that only GM incurred, and which it would not have incurred but

for the bribery scheme. This damage is the direct, substantial, and foreseeable

consequence of this bribery scheme orchestrated by FCA Group and the many acts

of racketeering that fueled the scheme. As has been revealed by GM’s ongoing

investigations and as discussed further herein, GM was the intended and targeted

victim of FCA’s and FCA NV’s criminal scheme.

2
7/13/18 Iacobelli Plea Agreement, at 7. The individual criminal pleadings cited
herein are filed in the Eastern District of Michigan, United States v. Durden,
et al., Case No. 2:17-cr-20406-PDB-RSW, unless specified otherwise.

3
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5. FCA Group did not perpetrate this long-running scheme with the

intended purpose to merely gain a general edge (in the form of lower labor costs) on

the market or to increase its market share. Instead, FCA Group’s scheme was

directed specifically at harming GM as part of FCA Group’s long-term goal to force

higher costs on GM causing it to be weakened and assist FCA NV in forcing a

merger with GM—a long standing objective of FCA NV and its former CEO, Sergio

Marchionne, since before FCA NV entered the US automobile manufacturing

market. This specific targeting of GM is exemplified by FCA Group’s placement

(aided by corrupt UAW officials) of two individuals within GM who were positioned

to obtain and share with FCA Group confidential GM information.

6. In 2014, using his power to name the UAW Trust’s designee to the GM

Board, Defendant Dennis Williams selected and placed Joseph Ashton, a corrupt

then-UAW Vice President for the GM Department, on GM’s Board. Upon

information and belief, despite Ashton owing fiduciary duties to GM, Ashton instead

used his position to pass confidential GM information to the UAW and FCA Group.

Upon information and belief, in return for his conspiring with FCA Group, Ashton

was the beneficiary of substantial payments overseas in at least one foreign bank

account in Ashton’s name or a business entity controlled by Ashton.

7. After GM rejected FCA Group’s formal merger offer in April 2015,

unrelenting, FCA Group doubled-down on its infiltration efforts by then

4
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purposefully placing its former employee, Alphons Iacobelli, in GM’s Labor

Relations Department. Alphons Iacobelli, who along with Marchionne was at the

center of the scheme at FCA Group, left FCA in 2015 and immediately sought

employment at GM. Because of the substantial efforts by all of the Defendants to

conceal their scheme, GM was unaware of FCA’s role in Iacobelli’s placement or of

Iacobelli’s crimes at the time he was hired by GM; nor was GM aware that Iacobelli

was under investigation by the Department of Justice when he reached out and was

hired into GM’s Labor Relations Department. Upon information and belief, after his

departure from FCA in June 2015 and continuing during his later employment with

GM, Iacobelli continued his involvement in the scheme by receiving payoffs from

FCA Group in return for sharing GM’s confidential information with FCA Group to

further harm GM. These actions were not done to nor did they harm the UAW;

instead they were intended to and did cause harm to GM, the intended target of the

FCA bribery scheme.

8. The appointment of Ashton to GM’s Board by Williams through the

UAW Trust allowed FCA Group, through its bribes of UAW officials, to further

tailor its scheme to directly harm GM. No other party or entity could have been

directly harmed as a result of this scheme. On GM’s Board, Ashton was privy to

detailed highly confidential information concerning GM’s view of and strategic

5
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129

response to FCA Group’s ongoing merger inquiries, as well as GM’s approach and

expectations for the 2015 CBA negotiations.

9. Both FCA and FCA NV have failed to conduct an independent or

meaningful investigation to identify, root out and discipline those involved in the

bribery scheme that has been admitted to in public since January 2018. GM only

recently learned the real reason for this blatant FCA and FCA NV governance

failure. Upon information and belief, the FCA-UAW bribery scheme is much

broader and deeper than previously suspected or revealed as it involved FCA Group

apparently using various accounts in foreign countries, including Switzerland,

Luxembourg, Liechtenstein, Italy, Singapore and the Cayman Islands, to control

corrupt individuals by compensating and corrupting those centrally involved in the

scheme to harm GM. The beneficiaries of such offshore accounts include former top

UAW leaders, such as former UAW President, Treasurer and Secretary Dennis

Williams (2010-2018), and former UAW Vice President Joe Ashton (2010-2014),

subsequently selected by Williams and appointed by the UAW Trust to be a director

on GM’s Board (2014-2017), as well as other FCA Group personnel. Upon

information and belief, tens of millions of dollars have been moved through these

offshore accounts to help perpetrate and protect the described scheme.

10. This bribery scheme was authorized at the highest levels of both FCA

NV and FCA. According to criminal plea agreements alone by former FCA Group

6
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129

executives, senior FCA Group executives “knowingly and voluntarily joined a

conspiracy in which FCA US LLC and its executives agreed to pay and deliver, and

willfully paid and delivered, more than $1.5 million in prohibited payments and

things of value to officers and employees of the UAW.”3 But, as alleged herein, the

actual amount of the bribes and the hush money paid is exponentially higher. These

FCA Group bribes were authorized, at least, by its then CEO Sergio Marchionne

(now deceased) to General Holiefield, the UAW Vice President and International

Executive Board Member (now deceased) and to other UAW officials who oversaw

the FCA business relationship. FCA executive Alphons Iacobelli has admitted (at

least in part) to this scheme and currently is in prison for some of these illegal acts.

Michael Brown, Director of Employee Relations at FCA and Co-Director of the

NTC, likewise has admitted (at least in part) to this scheme. Marchionne authorized

these bribes, and additional things of value to UAW officials, so that FCA could

cause GM to be at a disadvantage by driving up GM’s costs, invade its board room

and labor relations team, and, as detailed below, ultimately attempt to force a merger

with GM.

11. The purpose of the scheme ultimately was to harm GM by causing it to

incur higher labor costs that it otherwise would not have incurred and assist FCA

3
7/13/18 Iacobelli Plea Agreement, at 3; see also 5/25/18 Brown Plea Agreement,
at 3; 8/8/17 Durden Plea Agreement, at 4.

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129

Group in forcing a merger. The object of the agreement between FCA and UAW

was not to reduce the absolute labor costs of FCA or deprive UAW-FCA or

UAW-GM workers of higher wages or better benefits. Rather, the object of the

scheme was to harm GM by causing its overall labor costs to increase as a result of

the UAW purposefully denying it certain structural programs such as Global

Manufacturing System (“GMS”) support or the same formulary agreements,

described below, that would otherwise have been granted to GM but for the bribery.

While GM suffered increased labor costs, UAW members were not harmed by this

scheme as FCA-UAW employees received market-based wages and GM-UAW

employees received above-market wages to the direct detriment of GM.

12. The structural changes that FCA Group bribed the UAW to deny to GM

included, at least, genuine support from UAW leaders for GM’s GMS program, and

manipulation of certain contractual limits on Tier Two and temporary employees,

and other “side letter” agreements between FCA and the UAW.

13. Beyond denying the above structural changes to GM, the scope of the

scheme between the UAW leadership and FCA Group is further demonstrated by

the UAW agreeing to support FCA’s “longer term business plan,” which included

securing UAW support of FCA NV’s scheme to force a merger with GM. We now

know that was the result of bribery and the racketeering scheme.

8
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129

14. In 2015, with cooperation of UAW leadership purchased through

bribes, Marchionne schemed with then-UAW President Dennis Williams to use the

2015 CBA negotiations to increase the pressure on GM to merge.

15. After years of telegraphing his desire to merge GM and FCA (including

by approaching GM in 2012 about such a merger), in the spring of 2015, Marchionne

formally solicited GM for a merger, on behalf of FCA NV, and was rejected.

16. In the ensuing months, with the purchased support of certain former

UAW officials including Dennis Williams, Marchionne proceeded to orchestrate a

negotiation of the 2015 CBA designed, through the power of pattern bargaining, to

cost GM billions of dollars and a billion dollars more than the UAW had sought from

GM on its own.

17. Williams and Marchionne were aware that the federal government was

actively investigating the FCA-UAW bribery scheme, so FCA NV and FCA found

a different means to convey bribes to the UAW. FCA paid the equivalent of over

a billion dollars more than the UAW’s demand to GM in the 2015 CBA. The UAW

had demanded under a billion dollars of increased costs for the 2015 CBA until

Dennis Williams began negotiations with Marchionne. Then, in a 48-hour period,

the price tag more than doubled. FCA was giving the UAW a billion extra dollars in

return for something of greater value.

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18. The one-billion-dollar bribe paid by FCA through the 2015 CBA to

benefit the UAW was for the purpose of advancing the intended plan of FCA to

secure the necessary support of the UAW for its attempt to takeover GM. This

payment of a billion dollars was worth it to Marchionne and FCA, as they could

recoup greater than that amount through cost savings and synergies as a result of an

FCA-GM merger (in addition to the personal compensation Marchionne would reap

from such a merger).

19. Through a self-described “rich” FCA-UAW labor contract designed

specifically to harm GM, Williams and certain corrupt UAW leaders could seek to

hide their bribes from government investigators who would not have known the

UAW’s asking price and that FCA had paid more than double that price, while

Marchionne could impose unanticipated costs on GM in order to force a merger.

20. Through the power of pattern bargaining, which rendered GM unable

to negotiate core labor cost terms, this contract was imposed upon GM at a price

a billion dollars higher than the UAW’s President’s Demand. This provided an

easily-calculated over $1 billion direct harm from costs that GM would not have

incurred but for the bribes paid by FCA. UAW-represented workers were not

harmed by GM’s overpayment and instead benefited through the higher costs GM

had to pay.

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21. While GM ultimately resisted the takeover scheme, in the process

Marchionne and FCA Group negotiated a 2015 CBA that, as designed, directly

damaged GM as a result of the pattern of racketeering and the FCA Group’s control

over the UAW.

22. FCA NV took active steps to facilitate and conceal its bribery scheme

rather than address these systemic corruption issues. Those steps include FCA NV

(previously an Italian company) transferring its domicile to the Netherlands, which

is well known for its lax governance requirements, in 2014. FCA NV packed its

board with insiders who allowed FCA Group to falsely claim, despite having

conducted no meaningful internal investigation, that it found “no evidence that any

FCA US employees senior to Alphons Iacobelli were aware of or participated in any

illegal activities related to the” NTC.4

23. The governance structure of FCA is likewise designed to allow such

corruption as its board has no independent directors and is effectively overseen by

FCA and FCA NV insiders.

24. In light of the government investigation, the UAW has recognized the

need to engage in active reform to ensure it is free of corruption. UAW Acting

4
Robert Snell and Nora Naughton, The Detroit News “FCA-UAW Conspiracy
Ran Deeper, Longer, Lawyer Says” (August 13, 2018)
https://www.detroitnews.com/story/business/autos/chrysler/2018/08/13/fca-uaw
-conspiracy-ran-deeper-longer-lawyer-says/981325002/

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President Rory Gamble announced “widespread ethics reforms,” designed to “make

clear the UAW is committed to establishing the right mechanisms and safeguards to

protect the union from corruption and malfeasance.” GM agrees with the spirit of

the announced reforms, which are a necessary step towards “regaining the trust of

[the UAW’s] members, and ensuring the misconduct that has recently come to light

will never happen again.”5 President Gamble is involved in ongoing meetings with

U.S. Attorney Matthew Schneider to further address UAW reforms.

25. FCA Group, on the other hand, refuses to come to terms with this

stunning pattern of racketeering directed from its highest offices. FCA Group had

the NTC publicly claim that it was a “victim” rather than perpetrator of this fraud,

only to have a federal court reject that claim and conclude the “NTC functioned as

a willing co-conspirator with FCA.”6

26. As to Marchionne, who sat at the center of multiple fraudulent schemes

as detailed below, FCA Group has chosen to embrace his wrongful conduct. Rather

than acknowledge Marchionne’s wrongdoing and that of other high-level FCA

5
UAW Press Release, United Auto Workers Acting President Rory Gamble Enacts
Immediate Nationwide Ethics Reforms (Nov. 13, 2019),
https://uaw.org/united-auto-workers-acting-president-rory-gamble-enacts-imme
diate-nationwide-ethics-reforms/.
6
See United States v. Iacobelli, No. CR 17-20406, 2019 WL 1508035, at *1 (E.D.
Mich. Apr. 5, 2019).

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Group executives and implement necessary governance reform, in 2019 FCA

Group’s Chairman declared that Marchionne stood for “responsibility and openness”

and that “we . . . owe” Marchionne for helping make FCA Group what it is today. 7

FCA Group has chosen to essentially ratify years of its own racketeering.

27. Thus, as described more fully in this Amended Complaint, FCA Group

and its executives have engaged in a classic pattern of racketeering for nearly a

decade, including by committing multiple violations of the Labor Management

Relations Act of 1947 (“Taft-Hartley Act”), wire fraud, mail fraud, and money

laundering. As the targeted victim that has been directly harmed by FCA Group’s

scheme, GM seeks to recover its damages from Defendants for the benefit of GM

and its employees.

28. The damages that GM recovers will be used for investment in the

United States to grow jobs and for the benefit of its employees.

THE PARTIES

Plaintiffs

29. General Motors LLC: Plaintiff General Motors LLC is a Delaware

limited liability company with its principal place of business located at 300

7
FCA, Statement from FCA Chairman, John Elkann, on the One-Year Anniversary
of the Loss of Sergio Marchionne (July 24, 2019),
https://www.fcagroup.com/en-US/media_center/fca_press_release/2019/july/Pa
ges/statement_on_the_one_year_anniversary_of_the_loss_of_sergio_marchion
ne.aspx.

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Renaissance Center, Detroit, Michigan, and is a citizen of the States of Delaware

and Michigan. General Motors LLC is a subsidiary of General Motors Holdings

LLC, which is a wholly owned subsidiary of Plaintiff General Motors Company.

General Motors LLC is the largest automaker in the U.S. and an iconic American

brand that manufactures and sells automobiles in the U.S. under brands including

Chevrolet, Cadillac, Buick, and GMC. General Motors LLC is an employer in the

automotive industry, which has a substantial effect on interstate commerce.

30. General Motors Company: Plaintiff General Motors Company

(herein referred to as “GM Company” or “New GM”) is a Delaware corporation with

its principal place of business in Detroit, Michigan, and the ultimate parent of

General Motors LLC.

31. “GM” is used herein to refer individually or collectively to General

Motors LLC and General Motors Company.

Defendants

A. FCA Group

32. FCA US LLC (formerly known as Chrysler Group LLC):

Defendant FCA US LLC (“FCA”) is an automotive company based in Auburn Hills,

Michigan, formerly known as Chrysler Group LLC, the successor of Chrysler LLC.

“Chrysler” is used herein to refer individually or collectively to Chrysler Group LLC

and Chrysler LLC. FCA is a wholly owned subsidiary of FCA NV, a publicly traded

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foreign entity listed on the New York Stock Exchange (“NYSE”). FCA

manufactures and sells automobiles in the U.S. under brands such as Chrysler, Jeep,

Dodge, and Ram. FCA is an employer in the automotive industry, which has a

substantial effect on interstate commerce.

33. Fiat Chrysler Automobiles N.V. (formerly known as Fiat):

Defendant Fiat Chrysler Automobiles N.V. (“FCA NV”), the successor of the Italian

automotive company formerly known as Fiat S.p.A. (“Fiat”), is the ultimate parent

company and owner of FCA US LLC. FCA NV is organized under the laws of the

Netherlands, as a Naamloze Venootschap, and its principal executive offices are in

London, England. Since October 2014, FCA NV’s common stock has traded on the

NYSE under the ticker symbol FCAU, and it regularly files with the SEC annual

reports on Forms 20-F and furnishes Forms 6-K pursuant to Section 13(a) of the

Exchange Act. FCA NV is an automotive group that, both directly and through its

subsidiaries, designs, engineers, manufactures, distributes, and sells vehicles and

components; provides retail and dealer financing, leasing, and rental services; and

engages in media, publishing, and other business throughout the U.S., including in

Michigan.

B. Corrupt FCA Officials

34. Alphons Iacobelli: Defendant Iacobelli is a resident of Michigan and

was employed as the Vice President of Employee Relations at FCA and as the

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Co-Chairman of the NTC and its Joint Activities Board from 2008 to 2015. In this

role, Iacobelli was a senior official at Chrysler and FCA responsible for negotiating

and implementing labor agreements with the UAW. Through his position with

Chrysler and FCA, Iacobelli had the authority and acted as an agent for Chrysler and

FCA to direct the financial affairs of and approve payments made by the NTC. On

January 22, 2018, Iacobelli pled guilty to subscribing a false tax return, pursuant to

26 U.S.C. § 7206(1), and conspiracy to violate the Labor Management Relations

Act, 18 U.S.C. § 371, and was sentenced to 66 months in prison and a $10,000 fine

and ordered to pay $835,523 in restitution. At all times relevant to this Complaint,

Iacobelli was an agent of Chrysler and/or FCA.

35. Upon information and belief, Iacobelli, among others, has been secretly

compensated for his participation in the scheme and to ensure that his professed

cooperation with the government’s investigation does not implicate top FCA Group

executives or reveal the full scope of the scheme to target GM. The compensation to

Iacobelli included providing him with control over apparent foreign accounts, in his

name (or that of a close family member) and in the name of a business entity that he

controls (Business Advisory Group, an entity created by Iacobelli), in Italy,

Liechtenstein, Switzerland and Singapore. Upon information and belief, control over

these accounts and possibly further compensation from FCA Group continued after

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Iacobelli left FCA and later joined GM, and such funds remain available to Iacobelli

to this day and are being actively managed by his wife.

36. Jerome Durden: Defendant Durden is an individual currently residing

in Michigan and was employed as a financial analyst at Chrysler and FCA in its

corporate accounting department since 1985. In 2008, he was assigned by Chrysler

to act as the Controller of the NTC and as Secretary of the NTC Joint Activities

Board. He served in those roles until 2015. In his capacity as the Controller of the

NTC, Durden, as an agent for Chrysler and FCA, had the authority to approve and

did approve payments made by the NTC. In addition, Durden was selected by

Holiefield to serve as Treasurer of the Board of Trustees of the Leave the Light on

Foundation (“LTLOF”) from 2009 through June 2015. On August 8, 2018, Durden

pled guilty to failure to file tax returns, 26 U.S.C. § 7203, and conspiracy to defraud

the U.S., 18 U.S.C. § 371, and was sentenced to 15 months in prison and ordered to

pay $8,811 in restitution. At all times relevant to this Complaint, Durden was an

agent of Chrysler and/or FCA.

37. Upon information and belief, Durden, among others, has been secretly

compensated for his participation in the scheme and to ensure that his professed

cooperation with the government’s investigation does not implicate top FCA Group

executives or reveal the full scope of the scheme to target GM. Despite Durden’s

public claim to the Court that he received no compensation for his central role in the

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scheme, such compensation includes providing him control over apparent foreign

accounts in Liechtenstein and the Cayman Islands in his name and/or in the name of

his personal business entity, JAD Enterprises, created to conceal his ownership over

these accounts.

38. Michael Brown: Defendant Brown is an individual currently residing

in Michigan and was employed as a Director for Employee Relations at Chrysler and

FCA from 2009 to 2016. During that time, Brown was personally involved in the

negotiation and administration of the national CBAs between Chrysler/FCA and

UAW and had authority to sign letters and agreements on behalf of Chrysler/FCA

with the UAW. Brown also represented Chrysler and FCA as a Co-Director of the

NTC. On May 25, 2018, Brown pled guilty to misprision of a felony, pursuant to

18 U.S.C. § 4, and was sentenced to one year and one day in prison and a $10,000

fine. At all times relevant to this Complaint, Brown was an agent of Chrysler and/or

FCA.

C. Dennis Williams - Corrupted Former UAW Officer and President

39. Dennis D. Williams: Defendant Williams is an individual currently

residing in California, and he served on the UAW’s Executive Board, most recently

as the UAW’s President (2014 to June 2018) and previously as the UAW’s

Secretary-Treasurer (2010–14). Prior to 2010, Williams served on the UAW

International Executive Board as the Director of Region 4 (2001 to 2010) during

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which time he had direct dealings with Marchionne in connection with Marchionne’s

role as CEO of CNH Industrial, a maker of farm and construction equipment, which

is commonly controlled by Exor NV.

40. Upon information and belief, Williams, among others, has been secretly

compensated for his participation in the scheme and to ensure that he does not

implicate top FCA Group executives or reveal the full scope of the scheme to target

GM. The compensation to Williams includes providing him with apparent foreign

accounts that he controls in Switzerland and Liechtenstein in his name individually

and/or in the name of a business entity that he apparently controls, the so-called

Williams Charity Fund.

D. Joseph Ashton - Corrupt Former UAW Vice President and UAW

Trust Designated Director on GM’s Board

41. Joseph Ashton: Defendant Joseph Ashton is an individual currently

residing in New Jersey. Ashton served on the UAW’s Executive Board from 2006

to 2014, most recently as Vice President of the UAW’s GM Department from 2010

to 2014, and previously as the Regional Director for Region 9 from 2006 to 2009.

Following his time at the UAW, from 2014 to December 2017, Williams supported

Ashton serving as the UAW Trust’s designated director on the Board of Directors of

GM until he abruptly resigned. On December 4, 2019, Ashton pled guilty to

conspiracy to commit honest services wire fraud, 18 U.S.C. § 1349, and conspiracy

to commit money laundering, 18 U.S.C. § 1956(h).

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42. In his role as the Vice President of the UAW’s GM Department, Ashton

used his influence to further FCA’s scheme designed to increase GM’s labor costs

above market and above FCA’s costs and directly harm GM by not granting GM the

specific structural labor concessions it should have otherwise received but for the

bribes.

43. In return, upon information and belief, Ashton, among others, has been

secretly compensated for his participation in the scheme and to ensure that he does

not implicate higher-level FCA Group executives or reveal the full scope of the

scheme to target GM. Despite owing GM fiduciary duties in his role as a director,

Ashton did not disclose the scheme to GM. Upon information and belief, in return

for this cooperation, Ashton obtained control over at least one foreign account in the

Cayman Islands in his individual name and/or in the name of a business entity that

he apparently controls, the so-called Ashton Fund.

E. Significant Non-Parties and Other Entities

44. International Union, United Automobile, Aerospace and

Agricultural Implement Workers of America (UAW): The UAW is the union that

exclusively represents the labor forces for both GM and FCA. From 2009-2018, the

UAW represented approximately 50,000 GM employees and between 23,000 and

47,000 FCA employees. As such, the UAW has a significant degree of market power

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to force labor terms on either competitor, including through the ability to call strikes,

among other actions.

45. The UAW also has an unusual and limited governance structure where

only five officers of the UAW—the President, the Secretary-Treasurer, and three

Vice Presidents of the International Executive Board—effectively control its central

decision-making regarding the negotiation and administration of collective

bargaining agreements. These UAW officers possess particularly strong powers as

well, including the power to negotiate CBAs, call special conventions, authorize

strikes, and issue and revoke charters, among other powerful tools. While these

UAW officers operate in the context of an International Executive Board that

includes eleven “Regional Directors,” these officers effectively control the overall

decision-making, policy, director and officer elections, and negotiation and

administration of the CBAs. There are minimal checks and balances on the President

and the other four officers as they have no oversight board, committee or trustee that

is capable of overseeing and ensuring the integrity of the UAW Executive Board and

taking action to address malfeasance. In turn, these officers, who have nearly

complete control over UAW affairs, are elected only every four years and have

implemented practices to exercise substantial control over elections to perpetuate

their role on the International Executive Board. If any of these officers or directors

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act corruptly, they have the power and influence to inflict direct harm on any given

competitor in the name, and on behalf of, the UAW.

46. Sergio Marchionne (“Marchionne”): Non-party Marchionne

(deceased in 2018) served as the CEO of Fiat, and later FCA NV, from 2004 through

his death in 2018. Marchionne also served as the Chairman and CEO of FCA from

2014–18, the Chairman (2011–14) and CEO (2009–14) of Chrysler, and the COO

of FCA North America (2011–18). Marchionne also served as the CEO of CNH

Industrial (2004-2018), which was commonly controlled by Exor NV, which directly

and indirectly is the largest shareholder of FCA NV. At all times relevant to this

Amended Complaint, and until his death, Marchionne was an agent of FCA Group.

Marchionne, with the highest level of approval at FCA Group, centrally orchestrated

and later attempted to conceal the fraudulent scheme as alleged herein.

47. NTC: Non-party the NTC is a Michigan tax-exempt corporation with

its principal place of business in Detroit, Michigan. The NTC was formed under the

terms of prior CBAs between the UAW and Chrysler, whose obligations were

inherited by FCA following Chrysler’s bankruptcy. The stated purpose of the NTC

is to provide for the education, training, and retraining of UAW members employed

by FCA. The governing body of the NTC was known as the Joint Activities Board.

The Vice President of Employee Relations of FCA and the Vice President of the

UAW’s Chrysler Department served as Co-Chairmen of the NTC Joint Activities

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Board. The remainder of the Joint Activities Board was made up of senior officials

from FCA and the UAW.

48. General Holiefield: Non-party Holiefield (deceased in 2015) served as

the UAW Vice President for the Chrysler Department from 2006 through 2014. As

Vice President, Holiefield had primary responsibility for negotiating with

Chrysler/FCA and for administering the CBAs between the UAW and Chrysler/FCA

on behalf of tens of thousands of FCA employees represented by the UAW. From

2007 to 2014, Holiefield also served on the UAW Executive Board. During much of

the Holiefield leadership years, executives of Chrysler/FCA violated the Labor

Management Relations Act by bribing Holiefield and his staff. Millions of dollars

from Chrysler/FCA were diverted through NTC and LTLOF to pay for Holiefield’s

personal expenses and to conceal over a million dollars in prohibited payments and

things of value from Chrysler/FCA to Holiefield, his girlfriend (and later wife)

Monica Morgan, and other UAW officials.

49. Ron Gettelfinger: Non-party Gettelfinger is an individual currently

residing in Kentucky who served on the UAW’s Executive Board from 1992 to 2010,

most recently as the UAW President (2002 to 2010) and previously as a Vice

President (1998 to 2002) and as Regional Director (1992 to 1998).

50. Norwood H. Jewell: Non-party Jewell is an individual currently

residing in Michigan and served on the UAW’s Executive Board from 2011 to 2017,

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most recently as the UAW’s Vice President of the FCA Department (2014–17) and

previously as Regional Director (2010–14). Jewell also served as Co-Chairman of

the NTC. On April 2, 2019, Jewell pled guilty to conspiracy to violate the Labor

Management Relations Act, 18 U.S.C. § 371.

51. Virdell King: Non-party King is an individual residing in Michigan

and was a senior official in the UAW Chrysler Department from 2008 until she

retired in February 2016. In 2011 and 2015, King served on the UAW committee

responsible for negotiating the CBAs between UAW and FCA. On August 29, 2017,

King pled guilty to conspiracy to violate the Labor Management Relations Act, 18

U.S.C. § 371, and was thereafter sentenced to prison and a $5,500 fine.

52. Nancy Johnson: Non-party Johnson is an individual residing in

Michigan and was the top administrative assistant to Jewell, then the UAW Vice

President for the Chrysler department, from 2014 through 2016. In 2015, Johnson

served on the UAW committee responsible for negotiating the CBAs between UAW

and FCA. On July 23, 2018, Johnson pled guilty to conspiracy to violate the Labor

Management Relations Act, 18 U.S.C. § 371, and was thereafter sentenced to one

year and one day in prison and a $10,000 fine.

53. Keith Mickens: Non-party Mickens is an individual residing in

Michigan and was a senior official in the UAW Chrysler Department from 2010

through 2015. In 2011, Mickens served on the UAW committee responsible for

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negotiating the CBA between the UAW and FCA. Mickens also served as

Co-Director of the NTC and served on the NTC Joint Activities Board. On

April 5, 2018, Mickens pled guilty to conspiracy to violate the Labor Management

Relations Act, 18 U.S.C. § 371, and was thereafter sentenced to one year and one

day in prison and a $10,000 fine.

54. Wilson’s Diversifed Products: Upon information and belief,

non-party Wilson’s Diversifed Products, LLC (“Wilson’s Diversifed Products”) is a

Michigan limited liability company with a principal place of business in Detroit,

Michigan. Upon information and belief, Wilson’s Diversifed Products is owned and

controlled by Morgan.

55. Monica Morgan Photography: Upon information and belief,

non-party Monica Morgan Photography, LLC is a Michigan limited liability

company with a principal place of business in Detroit, Michigan. Upon information

and belief, Monica Morgan Photography is owned and controlled by Morgan.

56. Leave the Light on Foundation (“LTLOF”): During much of the

relevant time period, non-party LTLOF was a Michigan tax-exempt organization

with a principal place of business in Detroit, Michigan, controlled by Holiefield.

Numerous co-conspirators served as officers and directors of LTLOF, including

Keith Mickens (Vice President and director), Jerome Durden (Treasurer and

director), and Virdell King (director).

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57. Linda Knoll: Non-party Knoll serves as the Chief Human Resources

Officer for FCA NV a position she has held since at least 2011, and previously

served concurrently in the same role at CNH Industrial N.V., another company

controlled by Exor NV, where Marchionne was the Chairman of the Board until his

death. Ms. Knoll also sat on the Group Executive Counsel of FCA Group, which is

the highest operational body within FCA. In this role, Ms. Knoll is reportedly

responsible for overseeing the entirety of FCA Group’s human resources function,

including “organizational development, talent management, compensation and

benefits, employee relations, and compliance and staffing.”8

58. Peter Glenn Shagena: Non-party Shagena currently serves as the Vice

President of Employee Relations at FCA, a role he took over in 2015 replacing

Defendant Iacobelli. Shagena also served on the NTC Joint Activities Board from

2015 to the present. In this role, Shagena was a senior official at Chrysler and FCA

responsible for negotiating and implementing labor agreements with the UAW and

resolving disputes and grievances that arose under the CBAs between Chrysler/FCA

and UAW. Shagena was Director – Group Human Resources Manufacturing at

Chrysler, LLC in 2007. In 2009, he became the Director of Human Resources,

Manufacturing/World Class Manufacturing. In that role, he headed labor relations

8
https://www.fcagroup.com/en-US/group/governance/management/Pages/
linda_Knoll.aspx

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efforts, including the rollout of world class manufacturing, at all of the Company’s

manufacturing operations and joined the NTC. In 2013, he became Director of

Human Resources at FCA Mexico before returning in June 2015 to take on the Vice

President, Head of Employee Relations role, for FCA Group in North America,

effectively assuming the prior role of Iacobelli.

59. Colin Lightbody: Non-party Lightbody previously served in the labor

department at FCA (and previously Chrysler) from 1998 until his retirement in 2018

and reported directly to Iacobelli for many of those years. From 2014 to 2018,

Lightbody was the Director of Labor Economics for FCA, with a substantial role in

directing negotiations with the UAW. Lightbody describes his role at that time as

“[f]or many years, provid[ing] strategic guidance to and work[ing] directly with the

late FCA Chief Executive Officer, Sergio Marchionne.” Since retiring from FCA,

Lightbody has started his own consulting company, while also publishing blog posts

concerning various collective bargaining topics.

FCA-UAW CONTROL ENTERPRISE

(18 U.S.C. § 1962(b))

60. From July 2009 until at least 2017, FCA Group, through a pattern of

racketeering activity, acquired and maintained an interest in and/or control of the

UAW, and in particular its decisions and actions regarding CBAs and other labor

arrangements, which FCA Group and the other Defendants operated as an 18 U.S.C.

§ 1962(b) RICO enterprise (“FCA-UAW Control Enterprise”). In particular, as early

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as July 2009, FCA Group and the named Defendants, through operation of the NTC

and other means, paid bribes and gave items of value as alleged herein directly to

top UAW officers and officials in violation of the Taft-Hartley Act. Starting in

approximately July 2009, Defendants gave these items of significant value to UAW

officials with the purpose of acquiring and maintaining, directly and indirectly, an

interest in and/or control of the FCA-UAW Control Enterprise, particularly with

respect to the UAW’s negotiation and decision-making in determining CBA terms,

supplemental agreements, and the application of such terms.

61. The UAW is not a for-profit business; its primary purpose is to

negotiate, execute, implement, and administer CBAs for North American

autoworkers, among others. Through their racketeering acts, FCA Group and the

other named Defendants gained control of and exercised control over these essential

functions of the UAW. This control manifested itself in FCA Group and the other

named Defendants causing the UAW (1) to refuse certain structural changes to GM

that GM otherwise would have received, (2) agreeing to name FCA as the lead in

2015, (3) structuring an agreement in 2015 designed to specifically impose

asymmetric costs on GM, and (4) specifically advocating for the merger with GM.

Through its acts of racketeering, Defendants took over the essential and day-to-day

functions of the UAW, exercising control within the meaning of 1962(b).

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62. Through this exercise of control of the FCA-UAW Control Enterprise,

direct damage was inflicted on GM, including but not limited to actions taken during

the collective bargaining processes as more specifically alleged herein.

FCA-NTC ENTERPRISE
(18 U.S.C. § 1962(c))

63. Through a pattern of racketeering from July 2009 to 2017, as alleged

herein, Defendants also operated the NTC as an 18 U.S.C. § 1962(c) RICO

enterprise (“FCA-NTC Enterprise”). The named Defendants operated the FCA-NTC

Enterprise for the common purpose of directing funds from the NTC (and ultimately

from FCA) to certain UAW leaders. In particular, FCA Group and some of its top

executives have admitted that they willingly, purposefully, and unlawfully used the

NTC as a vehicle to bribe union officials, funneling millions of dollars through the

NTC for the benefit of certain union leaders in violation of the Taft-Hartley Act.

According to government prosecutors, the NTC “sits at the epicenter of a massive

conspiracy to corrupt the labor management process, as the conduit of choice for

illegal payments” by FCA.9 As further alleged herein, the bribery scheme and efforts

to suppress revelations from that scheme are much deeper than has been revealed to

9
Response to the UAW-Chrysler Skill Dev. & Training Program’s Mot. for
Recognition of Crime Victim Status and for Restitution at 1, In re Pet. of
UAW-Chrysler Skill Dev. & Training Program, In the Matter of United States v.
Iacobelli, No. 2:18-mc-51223-PDB (E.D. Mich. Oct. 1, 2018).

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date. Upon information and belief, in order to further the operation of the NTC as

an enterprise, millions of dollars in bribes have been given to individuals involved

in the scheme through control of funded offshore accounts to further conceal the

scope of the scheme and that the scheme specifically targeted GM.

64. FCA funded the NTC pursuant to a formula set forth in the CBAs

negotiated between FCA and the UAW. For years, FCA Group and its leaders

directed and allowed certain UAW officials to misappropriate money from the NTC

(with money ultimately coming from FCA Group) in return for, among other things,

“benefits, concessions, and advantages” related to the negotiation, implementation,

and administration of multiple CBAs. Further, Williams and Ashton, among other

UAW leaders, demanded and received money and other items of value from FCA

Group in return for assisting FCA’s scheme to harm and ultimately attempt to merge

with GM.

65. Each Defendant played a distinct role within the operation of the

FCA-NTC Enterprise. FCA Group and its employees coordinated to knowingly and

affirmatively direct funds from the NTC to certain UAW leaders, who knew it was

impermissible to receive funds from FCA. As described further below, the precise

role of each Defendant varied, but included encouraging certain UAW leaders to use

NTC funds impermissibly, taking steps to conceal the payments to UAW leaders,

and directly approving or demanding the impermissible payments. In addition,

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Defendants Iacobelli, Durden, and Brown, acting within the scope of their

employment at FCA Group and at the direction of senior management, made and

directed these illicit payments to UAW leaders through the NTC.

66. Through these actions, each of these Defendants made decisions on

behalf of the FCA-NTC Enterprise, by determining what payment should be

permitted to which UAW official, and/or carried out the decisions of the FCA-NTC

Enterprise by making, approving, demanding, or receiving such payments. These

payments were part of a coordinated and systematic scheme stretching back nearly

a decade. These Defendants thus operated the FCA-NTC Enterprise through

numerous racketeering acts, as described herein.

JURISDICTION AND VENUE

67. Because GM brings claims under the RICO Act, this Court has federal

question subject matter jurisdiction under 28 U.S.C. § 1331.

68. Venue in this district is proper under 28 U.S.C. § 1391 because a

substantial part of the events and omissions giving rise to the claims occurred in this

district.

69. In addition to the reasons identified below, the Court may exercise

personal jurisdiction over all Defendants under 18 U.S.C. § 1965(b), because the

ends of justice require that this conspiracy be tried in a single court. This Court is

the only possible location for such a single trial given that the overwhelming

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majority of actions and effects occurred in this district, and there is no other district

where all Defendants would be subject to personal jurisdiction without recourse to

§ 1965(b).

70. The Court has personal jurisdiction over FCA and FCA NV for several

additional reasons. FCA and FCA NV design, engineer, manufacture, distribute, and

sell vehicles in the U.S. and Michigan under brands such as Chrysler, Jeep, Dodge,

and Ram. As described herein, FCA and FCA NV engaged in and authorized a

decade-long racketeering scheme occurring principally in Michigan, directed to

harm GM, which is headquartered in Michigan. FCA NV’s actions directed towards

Michigan included the bribing of Michigan residents and routing bribes through the

NTC, which is headquartered in Michigan. Thus, the Court has personal jurisdiction

over FCA and FCA NV (a) under MCL § 600.715, because they have transacted

business within the state of Michigan, and did or caused to be done things in the state

or from which consequences were felt in this state, which give rise to the cause of

action in this case; and (b) under 18 U.S.C. § 1965(a), because they have transacted

affairs in this district. In addition, the Court has personal jurisdiction over FCA under

MCL § 600.711 because it carries on a continuous and systematic part of its general

business within Michigan such that it is essentially “at home” in Michigan. Indeed,

FCA is headquartered in Michigan.

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71. The Court has personal jurisdiction over Iacobelli, Durden, Brown,

Williams, and Ashton for several additional reasons. First, the Court has jurisdiction

over Iacobelli, Durden, Brown, Williams, and Ashton (a) under MCL § 600.705,

because during the relevant time period, they transacted business within the state of

Michigan, and did or caused to be done things in this state or from which

consequences were felt in this state, which give rise to the causes of action in this

case; (b) under 18 U.S.C. § 1965(a), because they have transacted affairs in this

district; and (c) with respect to all but Williams and Ashton, under MCL § 600.701,

because they are residents of Michigan.

DETAILED ALLEGATIONS

I. OPERATION CHRYSLER: FIAT ACQUIRES OPERATING

CONTROL OF CHRYSLER FOR NO CASH

A. Financial Crisis Threatens U.S. Auto Industry

72. In or about 2008, in the midst of the worst financial crisis since the

Great Depression, the automotive industry faced a major crisis. The industry had

been weakened by, among other things, rising gas prices, which drove consumers

away from trucks and SUVs, and competition from foreign automakers with lower

labor costs using non-unionized labor. Sales dramatically declined. By 2008, the

situation had turned critical as a once-in-a-generation credit crunch nearly took down

the world economy and wreaked havoc on the auto industry.

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73. Suffering several consecutive quarters of losses, in late 2008, the U.S.

auto manufacturers turned to the government for assistance. The U.S. Department

of the Treasury injected funds in General Motors Corporation (“Old GM”) and

Chrysler through the Troubled Asset Relief Program (“TARP”), but it served only

as a stopgap.

74. Chrysler filed for Chapter 11 on April 30, 2009. Old GM followed

approximately a month later.

75. Because the UAW represented 99 percent of Old GM’s unionized

employees and the government’s provision of any additional TARP funds was

conditioned on a new CBA that, in part, needed to set forth labor costs competitive

to Japanese transplants (e.g., Toyota, Nissan, and Honda), UAW leadership could

slow down and potentially block the entire transaction.

B. Fiat and Marchionne Seek Entry into the U.S. Market Through
Chrysler

76. At the same time in Europe, Fiat faced plummeting sales and a

deepening economic crisis. In September 2008, Marchionne told his executive

council, “Fiat needs to radically change its alliance strategy. We’ve done everything

we can on our own. If we’re going to survive this one, we need a partner.”10

10
JENNIFER CLARK, MONDO AGNELLI: FIAT, CHRYSLER, AND THE POWER OF A
DYNASTY 244 (2012) (“MONDO AGNELLI”).

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77. Fiat needed an opportunity to enter the U.S. marketplace and

recognized one in the financial crisis of the U.S. auto industry. Marchionne realized

that the Old GM and Chrysler bankruptcies “were changing the game. All of the

issues that had plagued the industry—its overcapacity, its poor use of capital, its

inefficiency, the crushingly high cost of investment for new models—were now

going to become unsustainable.”11 A “deal with Chrysler [could] be seen as part of

a series of ‘strategic partnerships’ [that Fiat had] sealed with other automakers in

recent years.”12 Fiat’s would-be “partner” was in the U.S., and the UAW was Fiat’s

bridge to establish a domestic footprint given the UAW’s significance in the U.S.

automotive market.

78. Marchionne, on behalf of Fiat, sought that critical connection—what

appeared to outsiders as an alliance with UAW leadership—to help further Fiat’s bid

to acquire Chrysler. Marchionne quickly made the head of the union’s Chrysler

Department, Holiefield, a strategic partner and soon thereafter “a true friend.” 13

Former UAW leadership, and Holiefield in particular, became Marchionne’s main

11
Id.
12
Jeff Israely, Fiat to Take 35% Stake in Chrysler, TIME (Jan. 20, 2009),
http://content.time.com/time/business/article/0,8599,1872719,00.html.
13
Sergio Marchionne, Eulogy for General Holiefield (Mar. 17, 2015),
https://media.fcanorthamerica.com/pdf.do?id=16436. (“Eulogy for General
Holiefield”).

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cohorts in Fiat’s business plan even while he explored a collaboration with Chrysler.

“If the union would come around to the view that the Fiat-Chrysler partnership was

the only way to keep the company from going bust, maybe it would throw its weight

behind Fiat when it came time for talks to start at the Treasury.”14

79. In early 2009, Marchionne and his team met with Holiefield and

then-UAW President Ron Gettelfinger in advance of any formal talks with the

government.15 This meeting laid the groundwork for a UAW-Fiat alliance.

80. While Marchionne was in active discussions with the UAW, on

March 30, 2009, the government gave Fiat and Chrysler only 30 days to reach an

agreement.16

81. Fiat began demanding what it needed from a new Chrysler-UAW CBA.

Marchionne wanted the UAW to commit to support World Class Manufacturing

(“WCM”). WCM is a manufacturing system that, according to Marchionne, “aims

to ensure that the FCA Group’s facilities are flexible and competitive with the best

14
MONDO AGNELLI at 247.
15
Id.
16
The White House, Remarks by the President on the American Automotive
Industry (Mar. 30, 2009),
https://obamawhitehouse.archives.gov/the-press-office/remarks-president-ameri
can-automotive-industry-33009.

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in the world.”17 “It broke down the union’s rigid job classification system with its

strict hierarchy and boundaries about who could do what.”18 In Marchionne’s view,

it “got rid of an excessive cost structure, and it created efficiency.”19 As led by Fiat,

Chrysler and Gettelfinger and Holiefield (on behalf of the UAW) agreed to

Marchionne’s demand to implement WCM.

82. Marchionne also wanted to use more temporary employees in place of

hourly workers. While Holiefield publicly claimed that he “would have to take [his]

family and leave town if [the UAW] agreed to that,” he quickly came around to

Marchionne’s ideas.20 UAW leadership agreed to lift any cap or restraint on Tier

Two workers until 2015. Tier Two workers are less senior employees who have a

lower wage structure than Tier One workers, have a different health plan, and are

provided with a 401(k) plan instead of a defined benefit pension. They are therefore

a less expensive labor source.

83. “Marchionne’s goal overall was to have as few constraints as possible

in his ability to operate Chrysler when it came out of bankruptcy. He wanted to save

17
FCA, Global Quality Through World Class Manufacturing,
https://www.fcagroup.com/enUS/media_center/insights/Pages/wcm_global_qua
lity.aspx.
18
MONDO AGNELLI at 259.
19
Id.
20
Id. at 258, 260.

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Chrysler, take it public, pay everyone back, and move on.” 21 On behalf of FCA

Group, Marchionne eventually implemented a bribery scheme to achieve this goal

and help revive Chrysler and then move on to harm and eventually seek to takeover

GM.

84. Holiefield thus formed a long-term “partnership with Marchionne to

help revive the company.”22 As Marchionne relayed, Holiefield was a “true partner

and a key force behind the transformation of [Chrysler].”23

85. Starting as of July 2009, merely one month after Chrysler emerged

from bankruptcy, Iacobelli and other FCA officials began to transfer hundreds of

thousands of dollars of Chrysler funds to Holiefield. These payments were “viewed

. . . as an investment in ‘relationship building’ with UAW Vice President

Holiefield.” 24 For example, Holiefield’s charity, LTLOF, received hundreds of

thousands of dollars in furtherance of FCA’s anticipated “high value/high leverage

21
Id. at 260.
22
Joseph Szczesny, Late UAW Vice President Leaves Tarnished Legacy,
WARDSAUTO (Aug. 4, 2017),
https://www.wardsauto.com/industry/late-uaw-vice-president-leaves-tarnished-l
egacy.
23
Eulogy for General Holiefield.
24
7/26/17 Iacobelli Indictment, at 13.

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programs” with the UAW. 25 These bribes, well known within FCA Group and

among certain former UAW leaders, helped fuel the start of a wide-ranging and

long-lasting conspiracy, described in detail herein.

Marchionne and Holiefield in November 200926

86. In addition to authorizing the bribes through the NTC, Marchionne

personally rewarded Holiefield for his assistance. For example, in February 2010,

Marchionne, acting as an agent of FCA Group, gave Holiefield a custom-made Terra

25
Id. at 10.
26
See Bill Pugliano, Sergio Marchionne Discusses the Future of the Chrysler Brand
(Nov. 4, 2009),
https://www.gettyimages.com/detail/news-photo/sergio-marchionne-chrysler-gr
oup-llc-chief-executive-news-photo/92709619? adppopup=true.

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Cielo Mare watch worth several thousand dollars in direct violation of the

Taft-Hartley Act. Showing his knowledge of wrongdoing, Marchionne sought to

conceal the bribe by “declar[ing] the goods at less than fifty bucks.”27 It was reported

that Marchionne then lied about the gift when questioned about it by federal

investigators several years later.28

87. Upon information and belief, FCA paid for the Holiefield/Morgan

wedding in Venice, Italy, and Marchionne approved of FCA Group’s funding of the

wedding.

27
7/13/18 Iacobelli Plea Agreement, at 8.
28
Robert Snell, FCA Chief Failed to Disclose Gift to UAW, Sources Say, THE
DETROIT NEWS (Aug. 16, 2018), https://www.detroitnews.com/story/business/
autos/chrysler/2018/08/16/sergio-marchionne-gave-expensive-watch-uaw-failed
-tell-investigators-orruption/985477002/.

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Morgan and Holiefield Photo Posted on Morgan’s Facebook Page29

88. In addition to purchasing Holiefield’s cooperation, on information and

belief, FCA Group and Marchionne also made substantial payments to Defendant

Ashton through at least one foreign financial account in the Cayman Islands. From

2010 to 2014, Ashton served as the UAW Vice President for the GM Department.

In this role, just as Holiefield was the primary negotiator between the FCA and

UAW, so too was Ashton the primary point of negotiation between the UAW and

GM. In putting his scheme into motion, Marchionne thus had effective control over

the UAW’s negotiations with FCA and GM. This allowed Marchionne and FCA

Group to ensure that Ashton imposed higher costs on GM, rather than the same

benefits it provided to FCA and that it otherwise would have given GM under pattern

bargaining but for the racketeering scheme.

C. FCA Obtains the Right to Purchase a Majority of Chrysler’s

Shares from the UAW

89. In June 2009, Chrysler emerged from bankruptcy with Fiat owning

20 percent of its equity. This was a coup for Fiat as it had only contributed

intellectual property and know-how, and no actual money. Fiat also obtained

operating control over Chrysler, and Marchionne became its CEO.

29
See Monica Morgan Photography, https://www.facebook.com/
MonicaMorganPhotography.

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90. Through the Chrysler bankruptcy, the UAW, through the UAW Trust,

emerged as the majority owner of Chrysler, owning 55 percent of the equity.

Additionally, the UAW Trust received a note payable for $4.6 billion at 9 percent

interest and the right to appoint a director to Chrysler’s Board. Fiat was given the

right to purchase 40 percent of the UAW Trust’s equity interest in Chrysler.

91. From bankruptcy, the UAW Trust also became the largest shareholder

of New GM, obtaining 17.5 percent of the equity, and receiving a $2.5 billion note,

260 million shares of preferred stock, warrants to purchase 45.5 million shares of

New GM stock, and the right to appoint a director to GM’s Board.

II. FCA FUNNELS MILLIONS TO THE UAW AND CERTAIN UAW

LEADERS.

92. In July 2009, FCA began a long-running intentional scheme of

improper payments to certain UAW officials, funneled through the NTC, made by

FCA senior executives and agents (including with the knowledge and approval of

Marchionne on behalf of FCA NV) to influence the collective bargaining process.

As a starter, FCA officials “used the credit card accounts and the bank accounts of

the NTC to conceal over $1.5 million in prohibited payments and things of value

paid to officers and employees of the UAW.”30

30
5/25/18 Brown Plea Agreement, at 3.

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93. Iacobelli and Durden professed that the NTC made these payments, as

authorized by the FCA Group, to keep UAW officials “fat, dumb, and happy” and

to “buy labor peace.” 31 As Iacobelli further professed, “FCA was making an

‘investment,’ by ‘spending thousands here,’ in the form of illegal payments to UAW

officials through the NTC, in an effort to obtain benefits, concessions, and

advantages for FCA in its relationship with the UAW.”32 And as Brown, FCA’s

Director of Employee Relations and NTC Co-Director claimed, “it was the intent of

FCA executives to ‘grease the skids’ in their relationship with UAW officials.”33

FCA Group then used that greased relationship to control the UAW and have it

impose higher costs on GM.

94. To minimize detection of the payments, FCA had the NTC provide the

bribes to various UAW officials through a variety of deceptive means and methods.

The bribes violated the Taft-Hartley Act, 29 U.S.C. § 186, and were concealed

through acts of mail and wire fraud, all constituting predicate acts of racketeering

within the meaning of 18 U.S.C. § 1961(1).

31
7/26/17 Iacobelli Indictment, at 16; 10/31/18 Durden Gov’t Sentencing Mem.,
at 2.
32
8/20/18 Iacobelli Gov’t Sentencing Mem., at 8.
33
Id.; 5/25/18 Brown Plea Agreement, at 4.

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95. Similarly, UAW Vice President Holiefield used his personal charity,

LTLOF, as one means to conceal his receipt of FCA bribes. Between July 2009 and

2014, Holiefield and his hand-selected LTLOF board members (which included

FCA executive Jerome Durden and UAW officials Keith Mickens and Virdell King)

transferred “more than $386,400 in funds” from the NTC to LTLOF. 34 Holiefield

and his team hid these transfers by improperly omitting them from the Form 990s

the NTC and LTLOF filed with the IRS. In turn, Holiefield, along with his girlfriend

and later wife, Monica Morgan, used the purported charitable donations for personal

expenditures.

96. As the bribery scheme grew in complexity and depth, Holiefield and

Morgan, with FCA Group’s knowledge, used false front businesses, including

Monica Morgan Photography, Wilson’s Diversifed Products, and even a false

hospice organization, in an attempt to launder funds from the NTC and LTLOF.

Between July 2009 and 2011, LTLOF paid over $70,000 to Monica Morgan

Photography, purportedly for photography lessons for underprivileged children. Yet,

Morgan only taught a handful of classes, cancelled most of them, and then spent the

money on fancy clothes, nightclubs, and restaurants. On another occasion in 2013,

the NTC paid Monica Morgan Photography $13,500, purportedly for services

34
8/8/17 Durden Plea Agreement, at 6.

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rendered, but, in fact, so that Morgan and Holiefield could pay off the last installment

on their new in-ground pool. Between January 2011 and July 2012, the NTC

transferred more than $425,000 to Wilson’s Diversifed Products, which Morgan and

Holiefield promptly used for personal expenses, including closing costs on the

purchase of a house. In 2012, Morgan then created yet another shell company to

receive over $200,000 in NTC funds, along with a fake hospice to allow LTLOF to

“donate” over $350,000 directly to Holiefield’s and Morgan’s pockets.

97. During the course of the conspiracy, the NTC at times would directly

pay the personal expenses of certain UAW officials. For example, through wire

transfer, the NTC paid off Holiefield’s mortgage on his personal residence in the

amount of $262,219.71.

98. To further evade detection and broaden the conspiracy, in and around

2012, FCA executives began to encourage the use of credit cards, with statements

sent through the U.S. mails and payments made in part using interstate wires, issued

to UAW officials by the NTC so they could charge personal expenses ultimately

paid for by FCA. “Iacobelli directed the NTC to follow ‘liberal’ credit card and

expense policies to persuade union officials to take company-friendly positions.”35

Certain UAW officials used these credit cards, including Johnson, King, Mickens,

35
8/18/17 King Information, at 11.

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and Jewell, charging, for example, $1,259.17 for luxury luggage; $2,182 for a

Italian-made Beretta shotgun; $2,130 for Disney World theme park tickets; over

$1,000 for a pair of Christian Louboutin designer shoes; and thousands of dollars in

electronics and many more such personal items.

99. UAW former-President Williams was deeply involved in the misuse of

the NTC as a RICO enterprise, directing it from the UAW side. As revealed in the

government’s indictment of UAW official Vance Pearson, Williams rented a villa in

Palm Springs, California, ostensibly for the UAW’s Region 5 Conference, from on

or about December 25, 2014 to January 31, 2015. During that time, upon

information and belief, Williams participated in or was aware of FCA Group funds

being used (via NTC credit cards) for lavish dinners and golf outings for UAW

officials in Palm Springs, including: $7,569.55 on January 9, 2015 at LG’s Prime

Steakhouse, $1,267.79 at Indian Canyons Golf Resort, $4,587.04 on

January 18, 2015 at LG’s Prime Steakhouse, $3,372.74 on January 23, 2015 at

Spencer’s Restaurant, $6,200.05 on January 24, 2015 at Palm Springs Steak & Chop

Restaurant, and $4,147.74 on January 28, 2015 at Melvyn’s Restaurant.36 Likewise,

as alleged by the government, Williams rented a villa in Cathedral City, California,

ostensibly for the 2016 UAW Region 5 Conference, from on or about

36
See 4/2/19 Jewell Plea Agreement, at 9–10.

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December 17, 2015 to March 31, 2016. During that time, upon information and

belief, Williams participated in or was aware of FCA Group funds being used for

personal purchases in Palm Springs including: $6,081.04 on February 3, 2016 at

Melvyn’s Restaurant, and $3,583.47 on February 12, 2016 at Palm Springs Steak &

Chop Restaurant. 37

100. FCA Group bought control of UAW leaders to ensure that their bribery

scheme achieved its goal of targeting and harming GM. For example, upon

information and belief, FCA NV perpetuated the operation and control of the RICO

Enterprises by not only bribing General Holiefield as alleged herein and as admitted

in criminal pleas, but also bribing Dennis Williams (UAW officer 2010-2018),

Joseph Ashton (UAW officer 2010-2014), and Ron Gettelfinger (UAW Officer

1992-2010), by granting those individuals control over foreign financial accounts

with substantial funds. Gettelfinger served as the UAW President after Fiat’s

purchase of Chrysler in 2009, and helped ensure that co-conspirators Holiefield and

Williams held and maintained positions of leadership within the UAW in 2010 in

order to preserve and progress the conspiracy to harm GM. For Gettelfinger, upon

information and belief, such accounts apparently exist in Panama and Switzerland

in his name and the name of a family member; for Williams, such accounts

37
Id. at 12.

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apparently exist in Switzerland and Liechtenstein in his name and a business entity

he controls; for Ashton, such an account apparently is located in the Cayman Islands

either in his name or that of a business entity he controls. Upon information and

belief, FCA NV enabled, funded and provided control to these individuals of these

above identified accounts.

101. Of course, this audacious scheme to harm GM would run the risk of

FCA Group employees blowing the whistle on such a scheme. To minimize that

risk, upon information and belief, FCA and FCA NV provided an extraordinary

amount of illicit compensation to its own current and former executives to carry out

the scheme to harm GM and ensure the successful operation and control of the RICO

Enterprises. As with former UAW leaders, this illicit compensation was provided

to these current and former FCA and FCA NV executives in the form of control over

foreign financial accounts that have been funded by FCA NV with millions of

dollars. Upon information and belief, FCA Group executives who accepted

compensation for purposes of executing, protecting and minimizing disclosure over

the scope and depth of the scheme including targeting GM as described herein

include:

(a) Alphons Iacobelli - As the former Vice President of Employee

Relations at FCA (2008-June 2015) and NTC Director

(2008-2015), Iacobelli executed on the scheme as directed by

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Marchionne and his superiors. FCA NV compensated Iacobelli

extremely well for his role in the scheme, including providing

him with control over millions of dollars held in financial

accounts apparently in Switzerland, Italy, Liechtenstein, and

Singapore both directly, through family, and a corporate entity

he controls.

(b) Jerome Durden - As the controller of the NTC Enterprise and a

Secretary of the NTC Joint Activities Board (2008-2015), who

facilitated many of the direct payments to the UAW, FCA NV

provided Durden with control over funds in financial accounts

held in Liechtenstein and the Cayman Islands. These accounts

are held in his name or the business entity that he controls. When

sentenced for his presumed involvement in the scheme, Durden

represented to the Court that he did not benefit from the scheme

in any financial respect. That representation, made in connection

with seeking a lighter prison sentence, is contrary to the

compensation provided in the referenced foreign accounts.

(c) Colin Lightbody - Lightbody was the Director of Labor

Economics at FCA (2014-2018) until he retired at age 56. In that

role and his predecessor roles at FCA, he reported directly to

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Iacobelli and helped him carry out the scheme. FCA NV

provided Lightbody with control over a Luxembourg financial

account to pay for his role in executing and covering up the

scheme. To help mislead after the scheme began to come to light,

on December 12, 2019, Lightbody injected himself into the

lawsuit and published a misleading blog post that purported to

analyze the reason that FCA had an $8-an-hour advantage over

GM in labor costs.38 In that blog, drafted and made available on

the internet to help fulfill his end of the bargain for the funds

provided to him in the Luxembourg account, he intentionally

omitted his knowledge of the bribery scheme and the secret

agreement that FCA would not be held to the reinstatement of

the 2015 cap as alleged herein.

(d) Linda Knoll - Knoll is the long-term Chief Human Resource

officer for FCA NV and reported directly to Marchionne. In that

position and given her role on the Group Executive Council of

FCA Group, Knoll not only had direct knowledge of the scheme

38
See Colin Lightbody, “Why does FCA have an $8 per hour competitive labor cost
advantage over GM?” (Dec. 12, 2019)
https://hrandlaborguru.com/blogs/news/why-does-fca-have-an-8-per-hour-
competitive-labor-cost-advantage-over-gm.

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alleged herein, but also was used to minimize and prevent any

employees from becoming “whistleblowers.” For example,

when an FCA executive came forward and publicly disclosed the

FCA national fraudulent sales scheme and assisted the SEC with

its investigation into that scheme as alleged herein, Knoll led the

retaliation against that employee including withholding

compensation from him. For her role in executing and covering

up the scheme, FCA NV provided her with control over financial

accounts in at least Luxembourg and Switzerland.

(e) Peter Glenn Shagena - Shagena served as an NTC Director and

Director of Labor Relations for World Class Manufacturing

through much of the conspiracy period, reporting directly to

Iacobelli. In that role, he was responsible for heading up labor

relations efforts, including the rollout of World Class

Manufacturing, at all of FCA’s manufacturing operations. He

also played a key role on FCA’s negotiations teams. When

Iacobelli retired in June 2015, Shagena replaced him as the Head

of Employee Relations for North America. Upon information

and belief, FCA NV compensated Shagena for his role in the

conspiracy including facilitating bribery of the UAW leaders and

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ensuring that he did not reveal the conspiracy. This compensation

included funding one or more financial accounts for Shagena in

one or more Swiss financial institutions.

III. FIAT AND ITS SUCCESSORS CORRUPTED FORMER UAW

LEADERS TO DAMAGE GM AND ACHIEVE LABOR PEACE FOR
FCA FOR YEARS.

102. Starting in July 2009 and continuing through at least 2015, in return for

FCA Group’s bribes, certain corrupt members of UAW’s senior leadership in place

at the time, including Ashton, Williams and Holiefield began providing Chrysler

with labor programs that provided it with cost advantages over GM. GM would have

received these structural labor benefits as well but for the bribes—as the goal of the

conspiracy was to ensure that GM had a higher cost structure than Chrysler and later

FCA. This CBA favoritism purchased through the bribes ultimately inflicted, as

FCA Group intended, massive direct damage on GM in the form of higher labor

costs. As a result of these bribes, GM faced substantially above-market labor costs.

UAW workers were not hurt, as UAW-represented GM workers were paid

above-market. These higher labor costs resulting from the scheme are

straightforward to calculate and trace as GM’s (and FCA’s) regular business

practices require the accurate costing of such programs.

103. For example, at the time of the 2011 CBA, Chrysler and the UAW

(through Iacobelli and Holiefield) documented their joint commitment to WCM,

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which was a “full fledged partnership.” They agreed that it was “of critical

importance that WCM be jointly implemented systematically and fully in order to

operate successfully and thereby position [Chrysler] and the [UAW] firmly among

the winners of the global automotive manufacturing community.”39 As directed by

the FCA Group to the UAW, including Williams and Ashton, the UAW denied GM

the same labor flexibility and use with respect to its manufacturing operations. The

UAW’s agreement to implement these more efficient labor programs at FCA did not

harm any individual FCA-UAW employees—as the programs did not impact the

individual wages of any given worker or curtail in any material way the benefits

received.

104. As described below, in 2014, in a Memorandum of Understanding

(“MOU”) negotiated outside of the collective bargaining process, the UAW again

committed to support FCA’s WCM program.

105. In October 2015, in a letter attached to the CBA, FCA and the UAW

(through Jewell, another recipient of FCA bribes) once again agreed that “the need

for unit flexibility to address fluctuating workloads is essential,” and committed to

“continue to support the full implementation of [WCM], New Hire Entry Level

Wages and Benefits, and significant efficiency improvements.” To that end, they

39
Letter from A. Iacobelli, Chrysler Group LLC, to General Holiefield,
International Union, UAW, World Class Employee Participation (Oct. 12, 2011).

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committed to “the flexible utilization of [the] salary workforce,” including: (a) that

there may exist “[i]nefficient work rules and work practices . . . within the salary

bargaining units,” (b) “[t]he flexible use of the salary bargaining unit workforce can

perform within classifications and departments, across classifications and

departments, within units, across units, and within locals,” and (c) “[t]he parties

agree to discuss any opportunities to assign work across locals provided there is

mutual agreement between the parties and a positive business case for keeping the

work in-house.”40

106. As FCA Group had directed through its bribery to certain corrupt UAW

officials, the UAW through Williams and Ashton, among others, denied these

benefits to GM, at the direction of FCA Group. GM made repeated efforts to

collaborate with UAW leaders on improvements to its Global Manufacturing System

(“GMS”), an efficiency improvement program that would have been on par with

WCM. For example, during a meeting on August 13, 2014, officials in the UAW’s

GM Department acknowledged that WCM was a superior program, in part, because

Chrysler management (specifically Marchionne) and the UAW worked closely to

ensure it was a joint effort. UAW leadership failed to disclose that union support for

FCA’s WCM was, in part, purchased through bribes. Moreover, UAW leadership

40
Letter from Glenn Shagena, FCA US LLC, to Norwood H. Jewell, International
Union, UAW, Salary Bargaining Unit Flexibility (Oct. 22, 2015).

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and GM discussed that “[t]here needs to be an effort for the UAW and GM leadership

to go through each element of GMS and together gain buy-in from the manufacturing

managers and UAW members,” and that “GMS cannot have the same success of

WCM without the involvement of UAW members.” But for FCA Group’s bribery,

the UAW would have granted this request to GM. Implementation of the GMS

would not have harmed any UAW members; it would have allowed GM and the

UAW to work collaboratively to increase the efficiency of GM’s production process,

ultimately benefiting GM and the UAW members (both through an increase in profit

sharing payments and in the overall health of GM).

107. Another advantage FCA Group purchased through bribery related to

“Tier Two” employees. As of the 2007 CBA, Chrysler, GM, and Ford employed

both “Tier One” and “Tier Two” employees. As described above, Tier Two workers

are less expensive employees who have a lower wage structure than those in Tier

One.

108. FCA and GM were initially subject to a 25 percent cap on Tier Two

workers under the 2007 CBA. This cap was lifted under pre-bankruptcy addendums

in 2009, but in their 2009 addendums both FCA and GM agreed to reinstate the cap

six years later in the 2015 CBA. GM’s 2011 CBA reiterated this commitment, stating

that “the parties will mutually agree to a hiring limit based on the entry level

percentage as of September 14, 2015” to “be no more than 25% and no less than

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20% of the total UAW-GM hourly population.” In recognition and anticipation of

this 2015 Tier Two cap, GM thus kept its proportion of Tier Two workers below the

anticipated 25 percent cap. By 2015, Tier Two workers comprised around 20 percent

of the UAW membership at GM.

109. Through the conspiracy, upon information and belief, certain corrupt

UAW leaders assured FCA that they would not insist on reinstating the Tier Two

cap in 2015. Upon information and belief, FCA had reached a “side letter” agreement

that the cap would not be reinstated, yet misled GM and the public by claiming in

an October 2011 released summary of the 2011 CBA terms that “the cap will be

reinstated at the end of” the 2011 CBA. From this private understanding purchased

through the conspiracy that FCA would not be subject to a Tier Two cap, FCA hired

Tier Two workers with abandon, possessing the incredibly valuable foreknowledge

that it would not be penalized by any reinstatement of the cap. By 2015, Tier Two

workers made up around 42 percent of the UAW membership at FCA—double the

proportion of Tier Two workers at GM. This difference purchased through the

bribery scheme provided FCA with a dramatic advantage with respect to average

labor costs. Meanwhile, without this inside knowledge, GM managed to the cap and

absorbed corresponding cost increases anticipating the 2015 cap reinstatement as

required by the contract. In 2015, as FCA had been privately assured, the UAW did

not insist on reinstating the Tier Two cap for FCA and, as negotiated through pattern

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bargaining, the cap was not reinstated for GM either. In the end, and unbeknownst

to GM in advance, ultimately there was no difference between how GM and FCA

were treated in the 2015 negotiations with respect to Tier Two workers (as a result

of the pattern bargaining). However, GM was harmed as a result of FCA’s bribery

because the UAW refused to inform GM in the time period before the expiration of

the 2011 CBA that this cap would not be reinstated. But for the bribes, the UAW

would have informed GM in 2011 that it did not intend to reinstate the Tier Two cap

as it privately assured FCA so that GM could have addressed hiring accordingly and

thus benefited its average labor cost.

110. FCA Group ensured that other additional advantages were denied to

GM. For example, upon information and belief, in 2014, FCA and the UAW agreed

to a formulary that would make better use of prescriptions that are widely available,

significantly reducing FCA’s health care costs. The formulary would have saved

GM up to $20 million per year. Negotiators for GM repeatedly requested FCA’s

more cost-effective formulary during collective bargaining, but the UAW refused to

agree, indicating the term would rankle UAW leadership. This request by GM would

have been granted, but for FCA’s bribery; the formulary did not harm any individual

FCA employee as the concession merely limited the range of prescription drugs

available for any particular condition, without preventing the treatment that an

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individual UAW member received; to GM’s knowledge, all FCA employees

received, in substance, the necessary prescription drug treatment that was prescribed.

111. Taken together, FCA Group’s corruption, through operation of the

FCA-UAW Control and NTC Enterprises, helped buy an average hourly wage

advantage to take FCA from worst to first among the Detroit-based automakers. In

2006, Chrysler had the highest average hourly labor cost. Chrysler’s employees were

paid $75.86 in wages and benefits on average, and Old GM’s employees were paid

$70.51. Chrysler, Old GM, and Ford’s labor costs exceeded non-unionized foreign

automaker costs by approximately 50 to 80 percent prior to bankruptcy.

112. Through its corruption, bribes, and operation of the RICO Enterprises,

FCA was able to gain an average hourly wage advantage over GM. By 2015, FCA

slashed its average hourly labor costs to $47—in the range of non-unionized foreign

automakers operating in the U.S.—and $8 less on average per hour than GM ($55).

FCA’s average hourly wage advantage continues to this day: its labor costs are on

average $8 per hour less than GM. This hourly wage disparity is not due to paying

FCA employees less in wages in benefits—but rather it was due to denying GM

structural labor programs that would have lowered its average hourly wage rate and

that GM would have received but for the bribes.

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IV. FCA GROUP CONSPIRED WITH UAW LEADERS TO ATTEMPT A

TAKEOVER OF GM BY MERGER

113. Sergio Marchionne held a longstanding view that the U.S. automotive

market required consolidation to remain competitive. As he told Automotive News

in 2008: “You need at least 5.5 million to 6 million cars (a year) to have a chance of

making money. . . . Fiat is not even halfway there. And we are not alone in this. So

we need to aggregate, one way or another.”41

114. As CEO of Fiat since 2004, Marchionne had long sought a merger with

GM. After failing to effect a merger in 2005, Marchionne saw another opportunity

41
Gilles Castonguay, Fiat Can’t Survive Alone; Needs Partner: CEO, REUTERS
(Dec. 8, 2008),
https://www.reuters.com/article/us-rb-fiat-ceo/fiat-cant-survive-alone-needs-par
tner-ceo-idUSTRE4B738Z20081208.

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after Fiat acquired Chrysler in 2009. “[A]fter fixing Chrysler, let’s . . . take General

Motors and merge them together. Once and for all, let’s straighten out the car

industry, creating an American giant that also allows a long-term future for Fiat.”42

115. As alleged, a central purpose of the bribery scheme overseen by

Marchionne was to harm GM by saddling it with higher labor costs thus inducing it

to merge with FCA to achieve synergies and a higher return on capital. With the

scheme well underway and having a desired effect, in October 2012, when Fiat

owned a significant portion of Chrysler (approximately 59 percent) and the UAW

Trust owned the remainder, Marchionne wrote to GM’s CEO on behalf of FCA

Group proposing a “comprehensive” combination between Fiat, Chrysler, and GM.

GM rebuffed this attempt at a combination. But Marchionne remained resolute in

his quest to force an FCA Group-GM combination.

A. Marchionne Prepares on Behalf of FCA to Force a Takeover of GM

by Merger

116. By 2013, Chrysler had only two shareholders: (1) Fiat, which owned a

controlling 58.5 percent stake; and (2) the UAW Trust, which owned the remaining

41.5 percent.

42
TOMMASO EBHARDT, SERGIO MARCHIONNE 63–64 (2019) (translated from
Italian).

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117. In July 2012, Fiat elected to exercise its option to purchase a portion of

the UAW Trust’s stake in Chrysler, offering $139.7 million for 3.3 percent. Fiat and

the UAW Trust apparently disagreed over the price, and Fiat sued in Delaware

Chancery Court. In October 2013, press reports indicated that “Fiat plan[ned] to urge

the UAW to help it convince [the UAW Trust] to unload its [entire] 41.5% stake in

Chrysler.”43

118. In December 2013, Fiat apparently “scripted” Holiefield at an UAW

Executive Board meeting to support Fiat’s goal of buying all of the UAW Trust’s

stake. Iacobelli emailed that Holiefield would “create a dialogue pursuant to our

outline” at the meeting which, upon information and belief, involved having the

UAW support a complete sale of its Chrysler interest to Fiat. 44 This scripting

demonstrates the degree of Fiat’s control over the UAW and its top officials.

119. On January 1, 2014, Fiat announced an agreement to acquire the UAW

Trust’s entire stake in Chrysler for $4.35 billion. The transaction closed on

January 21, 2014. Nearly half that amount, $1.9 billion, was financed through a

43
Clark Schultz, Fiat Leans on the UAW for Chrysler Sale, SEEKING ALPHA (Oct.
17, 2013),
https://seekingalpha.com/news/1334672-fiat-leans-on-the-uaw-for-chrysler-sale
44
7/13/18 Iacobelli Plea Agreement, at 9–10.

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special distribution by Chrysler with Chrysler agreeing to pay the UAW Trust

another $700 million over four years.

120. Although not a party to the foregoing transaction, the UAW itself

entered an “enforceable” MOU with FCA promising to “actively assist in the

achievement of FCA’s long-term business plan.” Upon information and belief, while

the agreement does not appear to have been published, it contains no termination

date. In short, this agreement was an attempt by FCA and its co-conspirators to

paper over—and provide an appearance of legitimacy to—what had previously been

agreed to in their long-running bribery scheme. From FCA’s Annual Report:

FCA US and UAW executed and delivered a contractually

binding and legally enforceable Memorandum of
Understanding (“MOU”) to supplement FCA US’s
existing collective bargaining agreement. Under the
MOU, the UAW committed to (i) use the best efforts to
cooperate in the continued roll-out of FCA US’s World
Class Manufacturing (“WCM”) programs, (ii) to
actively participate in benchmarking efforts associated
with implementation of WCM programs across all FCA’s
manufacturing sites to ensure objective competitive
assessments of operational performance and provide a
framework for the proper application of WCM principles,
and (iii) to actively assist in the achievement of FCA
US’s long-term business plan. (Emphasis added.)45

45
FCA, 2014 ANNUAL REPORT, AT 178,
https://www.fcagroup.com/en-US/investors/financial_regulatory/financial_repo
rts/files/FCA_2014_Annual_Report.pdf.

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121. Undoubtedly, this MOU conferred a competitive advantage upon FCA

outside of the standard collective bargaining process. As stated by FCA in its Annual

Report, the UAW’s commitments under the MOU were of a “unique nature.”

Through its bribery, control of the UAW, and operation of the NTC, FCA ensured

that UAW leadership conferred these unique advantages only on FCA and, as

alleged herein, denied the same to GM to make sure that GM had higher costs.

122. Fiat and Chrysler merged into FCA on October 12, 2014, with

Marchionne at the helm of the combined entity. 46

123. After taking full control of Chrysler, and having secured control of the

FCA-UAW Control Enterprise through bribery of its top officials, Marchionne set

his sights on forcing a merger with another one of the “Big Three” North American

automakers. Given the ownership structure of Ford, with the substantial share of

voting power held by the Ford family, Ford would never be a target for Marchionne’s

merger ambitions. GM was the only U.S. automaker target, and thus Marchionne

had long focused his sights on GM.

46
GM does not allege there was a violation of any securities law or requirement in
connection with the sale and purchase of the Chrysler securities. As GM
understands the facts, the ultimate selling price and terms that Fiat paid for the
Chrysler shares were set following a court opinion concerning the terms of the
purchase and certain third parties not impacted by the bribery scrutinized and
approved the securities aspect of the transaction.

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B. President Williams and Defendant Ashton Are Key Players in the

Takeover Conspiracy

124. In 2013 and 2014, as FCA consolidated its control of Chrysler,

Marchionne turned to weaponizing his bribery scheme of the UAW to pressure GM

to agree to merge with FCA.

125. By this time, the primary UAW leaders FCA Group had been bribing

had either already left the UAW (Gettelfinger) or were on their way out (Holiefield

announced in November 2013 he would retire the following year). Yet, knowing that

ongoing control of the UAW was crucial to the scheme, FCA Group had been bribing

UAW Vice President Ashton and UAW Secretary-Treasurer and President Dennis

Williams (among others). In 2014, Marchionne thus turned for support to the new

UAW President, longtime friend and merger “wingman,” Dennis Williams.

Williams cooperated with the goals and plans of FCA and FCA NV and took

affirmative steps to advance those goals as his cooperation had been purchased many

times over. Marchionne and Williams had known each other since the 2000s, when

Williams negotiated contracts at a Fiat-affiliated truck and tractor company.

Williams has affirmed that he tries “not to second-guess Sergio,” and that the pair

have a “very good relationship,” which was secured through the bribery of

Williams.47

47
Michael Martinez, UAW President: Union Monitoring FCA-GM Merger
Reports, THE DETROIT NEWS (June 18, 2015),

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126. In addition to Williams, FCA Group and Marchionne also turned to

UAW Vice President Joe Ashton. As the Vice President for the GM Department of

the UAW, Ashton had the ability to directly influence and control the labor relations

between GM and the UAW. Ashton was thus important to the scheme to ensure that

GM did not receive the same labor advantages as FCA and, thus, that GM incurred

higher costs. By 2014, Williams, having proven his loyalty in support of the scheme,

and FCA Group found an even more valuable use for Ashton—they chose him to be

the UAW Trust’s designee on GM’s Board. At that point, Ashton was well-situated

to convey to FCA Group confidential GM information relating to GM’s CBA

negotiations and strategy including with respect to FCA Group’s merger overtures.

127. FCA’s control over Williams, the President of the UAW at the time,

gave FCA substantial control over the UAW. As alleged herein, the President of the

UAW has substantial power over the UAW, particularly when it comes to structuring

and ordering of the CBA negotiations.

128. Williams was a willing co-conspirator in Marchionne’s bribery and

takeover scheme, especially given the UAW’s finances. In 2013, the UAW’s

https://www.detroitnews.com/story/business/autos/2015/06/18/uaw-monitoring-
fca-gm-talks/28925955/.

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financial circumstances were so dire that it sold $47 million in assets and “raid[ed]

its strike fund to pay operating expenses.”48

129. When Williams took office, he promptly encouraged further corruption.

With the full support of FCA Group, Williams directed his lieutenants and other

corrupt officials to use NTC funds and credit cards for travel, dining, and other

illegal purposes to improve the UAW’s budget (which the officials then used, in part,

for their own purposes). FCA Group even had the NTC pay the salaries and benefits

for high-level UAW employees to work at the NTC when they performed little or

no work for the NTC and worked almost exclusively for the UAW. As Nancy

Johnson admitted, “[t]his directive was issued in order to reduce costs to the UAW

budget from such expenditures because the UAW’s budget was under pressure.”49

Williams was not a bystander in this scheme; instead, Williams directed other UAW

officials to continue the corruption. 50 Notably, the bribes from FCA to certain UAW

officials continued after Williams assumed the UAW Presidency.

48
Tom Krisher, Associated Press, Detroit Automakers Worry About UAW Money
Struggles, YAHOO FINANCE (Feb. 22, 2014),
https://finance.yahoo.com/news/detroit-automakers-worry-uaw-money-144156
521.html; Associated Press, UAW Votes to Raise Dues for First Time in 47 Years,
CNBC (June 3, 2014),
https://www.cnbc.com/2014/06/03/united-auto-workers-votes-to-raise-dues-for-
first-time-in-47-years.html.
49
7/23/18 Johnson Plea Agreement, at 9.
50
6/3/20 Jones Plea Agreement, at 11 (referring to Williams as “UAW Official B”).

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130. By the time of the 2015 CBA negotiations, Williams had long been

conspiring with Marchionne, and FCA and FCA NV effectively controlled the

decision-making of Williams and other top UAW officers as alleged herein.

C. FCA Undertakes “Operation Cylinder”

131. By 2014, FCA Group had been rejected repeatedly by GM regarding a

merger between the two companies. But in early 2015, having successfully

consolidated control over Chrysler and positioned FCA NV for merger, FCA Group

believed it was in a much stronger position to force a GM merger.

132. With Marchionne as the lead, FCA Group schemed that it could

effectively take over GM through a merger (code-named “Operation Cylinder”),

have Marchionne remain CEO of the combined companies, and oversee the largest

auto company in the world. 51 In part, for this very reason, Marchionne, on FCA

Group’s behalf, had authorized the bribery of UAW leaders, whose support was

essential to the success of Operation Cylinder given that, among other reasons, the

UAW could effectively block a merger under certain terms in the CBA. That the

UAW wielded this veto potential over any merger was well known to Marchionne

and Williams.

51
Tommaso Ebhardt, The Crisis Fiat Faced As It Lost an Indispensable Leader,
BLOOMBERG BUSINESSWEEK (Apr. 23, 2019),
https://www.bloomberg.com/news/articles/2019-04-23/the-crisis-fiat-faced-as-it
-lost-an-indispensable-leader.

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133. FCA Group initiated its takeover plans in March 2015, when

Marchionne, on behalf of parent company FCA NV, wrote to GM’s Board and

management, formally proposing the merger between GM and FCA NV.

134. GM vetted the proposal with management, its advisors, and its Board,

ultimately rejecting the offer on April 14, 2015. Ashton sat on GM’s board when

GM undertook this analysis.

135. Undeterred, two weeks later, Marchionne went public with an unusual

published PowerPoint that he entitled “Confessions of a Capital Junkie: An insider

perspective on the cure for the industry’s value-destroying addiction to capital.” In

it, Marchionne promoted the benefits of consolidation as “too large to ignore.” The

deck claimed nearly $5 billion in annual savings with such a GM/FCA merger based

on reduction in investments and R&D, “with no impact on number employed.”52

136. In the spring of 2015, as the collective bargaining process ramped up,

Marchionne pursued a full-court press media strategy to achieve Operation Cylinder.

He geared his strategy to apply maximum pressure at key intervals in labor

negotiations, which were well underway.

52
FCA, Confessions of a Capital Junkie: An Insider Perspective on the Cure for
the Industry’s Value-Destroying Addiction to Capital (Apr. 29, 2015), available
at https://www.autonews.com/assets/PDF/CA99316430.PDF.

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137. Unbeknownst to GM, the U.S. Attorney had commenced an

investigation by at least 2015 into FCA-UAW-NTC corruption. Marchionne

strategically decided to oust Iacobelli as an employee, but not from the conspiracy.

In June 2015, Iacobelli abruptly resigned from FCA. He then aggressively sought

employment with GM so that he could continue to funnel information to his former

FCA co-conspirators.

138. Marchionne then assumed a role not typically undertaken by a CEO:

leading labor negotiations with the UAW and his purchased co-conspirators

Williams and Jewell.

139. On June 18, 2015, at the request of UAW President Williams, GM CEO

Mary Barra, GM President Daniel Ammann, GM CFO Chuck Stevens, and GM lead

labor negotiator Cathy Clegg attended a meeting with UAW President Williams and

Vice President Cindy Estrada, who relayed and championed Marchionne’s merger

proposition despite the fact that GM had already formally rejected it by letter to FCA

NV’s Chairman and CEO who had made the offer. Working at Marchionne’s behest

as a result of the bribery scheme, Williams used his position to advocate for the

merger and to encourage GM to consider the proposed merger. GM made clear to

Williams that it was not interested in merging with FCA NV.

140. The next day, the GM Board was informed of the Williams meeting.

They were informed that Marchionne had been in direct talks with Williams about a

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merger and apparently had tapped Williams as FCA Group’s messenger and

advocate. And that the day before, Williams relayed that Marchionne had told him

the GM Board had not seriously considered the FCA Group merger proposal—an

untrue statement.

141. In addition to the bought and paid-for UAW officials, Marchionne

enlisted hedge funds and activist investors to support pursuing Operation Cylinder.

The Wall Street Journal reported that Marchionne viewed activist partners “as a

means to force consolidation on the fragmented auto industry.” 53 FCA had

reportedly lined up initial commitments to finance a $60 billion cash offer for GM.

Days before the ceremony that formally opened labor negotiations, Marchionne told

the Financial Post that the company’s modeling suggested an FCA NV-GM merger

was “the most logical combination in the entire industry.”54

142. On July 13, 2015, bargaining officially commenced with the tradition

of “handshakes” between UAW leadership and the three Detroit automakers.

53
Eric Sylvers & John D. Stoll, Chrysler Boss Recruits Activists to Prod GM Into
a Merger, WALL STREET JOURNAL (June 18, 2015),
https://www.wsj.com/articles/chrysler-boss-recruits-activists-to-prod-gm-into-a
-merger-1433806966.
54
Kristine Owram, Fiat Chrysler, GM Merger Is Most Logical Combination in the
Entire Auto Industry: Sergio Marchionne, FINANCIAL POST (July 10, 2015),
https://business.financialpost.com/news/fiat-chrysler-gm-merger-is-most-logica
l-combination-in-the-entire-auto-industry-sergio-marchionne.

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143. Hugging Williams at the FCA-UAW “handshake” ceremony,

Marchionne signaled that consolidation using the UAW as the hammer was his goal

in the negotiations, exclaiming that, “[w]hatever happens in terms of consolidation,

it would never be done without the consent and support of the UAW. It’s that

simple.”55 Williams, Jewell, and other UAW officials celebrated that night with an

$8,000+ meal at the London Chop House—paid for by FCA through the NTC. 56

Marchionne Hugging Williams at “Handshake” Ceremony57

55
Daniel Howes, Marchionne’s Merger Quest Not Over, THE DETROIT NEWS
(July 27, 2015),
https://www.detroitnews.com/story/business/columnists/daniel-howes/2015/07/
27/howes-marchionnes-merger-mania-lives-despite-gm/30766303/.
56
12/12/18 Johnson Gov’t Sentencing Mem., at 4–5.
57
See Alexa St. John, Marchionne Didn’t Disclose Expensive Watch Given to UAW
Leader, Report Says, AUTOMOTIVE NEWS (Aug. 16, 2018),
https://www.autonews.com/article/20180816/OEM/180819869/marchionne-did
n-t-disclose-expensive-watch-given-to-uaw-leader-report-says.

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144. As noted, Marchionne had purchased the support of the UAW to

support a merger with GM because of the UAW’s ability to object to such a merger.

FCA and GM had signed documents stating that they would “not . . . partially or

wholly sell, spin-off, split-off, consolidate or otherwise dispose of in any form, any

. . . asset or business unit of any type, constituting a bargain unit under the

Agreement.”58

145. Between July and mid-September 2015, GM bargained with the UAW

through its subcommittees. The GM Board gave its negotiators authority to negotiate

within a particular range.

146. During these negotiations, Defendant Williams gave his list of

“President’s Demands” to GM. Based on GM’s calculations, the Williams’s

“President’s Demand” reflected a CBA with a total cost increase of just under

a billion dollars over the 2011 CBA.

147. Over the next couple of weeks, GM and the UAW continued to

negotiate with various proposals and counter-proposals. GM made offers of

increasing total cost, while the UAW was progressing down from its opening

demand.

58
Letter from Glenn Shagena, FCA US LLC, to Norwood H. Jewell, International
Union, UAW, Plant Closing and Sale Moratorium (Oct. 22, 2015); see also Letter
from Catherine L. Clegg, General Motors LLC, to Cynthia Estrada, International
Union, UAW, Plant Closing and Sale Moratorium (Oct. 25, 2015).

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148. Prior to September 13, 2015 and before selecting the target, the UAW

had made various concessions, as had GM. The total incremental costs for the new

potential deal were over 20 percent less than the UAW’s initial demand of nearly

$1 billion. The UAW’s principal negotiators, represented to GM that they could “sell

it”—that is, the deal that was on the table—to the UAW’s members.

149. During bargaining, Marchionne continued to agitate in the press for a

merger between GM and FCA NV. Marchionne signaled that he would do what it

would take to force a GM merger, telling Automotive News in an interview published

on August 30, 2015: “It would be unconscionable not to force a partner.” When

asked if that meant FCA NV would make a hostile bid, Marchionne explained, “Not

hostile, [but] [t]here are varying degrees of hugs. I can hug you nicely, I can hug you

tightly, I can hug you like a bear, I can really hug you. Everything starts with

physical contact. Then it can degrade, but it starts with physical contact.”59

150. A key to Marchionne’s Operation Cylinder scheme was a practice

known as pattern bargaining, a strategy in which unionized workers across an

industry attempt to bargain uniform terms in their contracts. The UAW describes

59
Larry P. Vellequette, Marchionne Puts the Squeeze on GM; GM’s Response:
‘Why Bail Out FCA?’, AUTOMOTIVE NEWS (Aug. 30, 2015),
https://www.autonews.com/article/20150830/INDUSTRY_ON_TRIAL/308319
981/marchionne-puts-the-squeeze-on-gm-gm-s-response-why-bail-out-fca
(emphasis added).

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pattern bargaining as “a core part of [its] bargaining strategy” 60 and a “powerful

strategic tool.” 61 Pattern bargaining is a potent force multiplier: through it,

Marchionne needed only certain corrupt UAW leaders’ support to impose

anti-competitive conditions aimed at GM. As part of his and Marchionne’s criminal

scheme, Williams weaponized pattern bargaining, not to protect the interests of the

UAW’s members, but to advance FCA Group’s interests by promoting

Marchionne’s merger. FCA Group sought to leverage pattern bargaining to impose

asymmetrical costs on GM, with the goal of causing harm to GM by it incurring

massive labor costs and making it more likely to favorably consider a merger with

FCA given the synergies touted by Marchionne.

151. Approximately every four years, each Detroit-based automaker

negotiates a CBA with the UAW. To increase its leverage in the industry, the UAW

has ensured that each CBA expires at the same time, resulting in simultaneous

negotiations. The UAW begins negotiations with each automaker through

subcommittees in July.

152. Months later, and shortly before contract expiration, the UAW selects

one of the automakers as a “lead” or “target” company, with which the UAW

60
UAW, Pattern Bargaining (Oct. 25, 2015), https://uaw.org/pattern-bargaining/.
61
Letter from Rory Gamble, Vice President, UAW, to UAW National Ford
Department, Negotiations Update (Oct. 18, 2019).

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negotiates a CBA. Then, the UAW exerts pressure on the other two companies to

use the first agreement as a “pattern” for negotiations. The UAW has particularly

strong leverage to do so, i.e., the threat of a costly nationwide strike (as it proved to

the cost of billions of dollars in 2019).

153. Williams has publicly admitted to forcing automakers into a pattern:

“We believe in pattern bargaining. The companies ought to compete on a product,

quality, engineering and process and not on the backs of workers. That philosophy

has been embedded for us since Walter Reuther and is embedded with Dennis

Williams.”62

154. Because pattern bargaining is such a powerful tool, it must be premised

on good faith, arm’s-length negotiations. Otherwise, as here, corrupt actors can use

pattern bargaining to directly harm a competitor.

155. While the government had imposed a “no-strike” rule at the automakers

beginning in 2009, by the time of the 2015 negotiations, the provision was no longer

in effect, making the 2015 target position particularly significant.

156. The UAW typically selects the largest and best performing automaker

as the target. This practice allows the union to maximize gains by locking in terms,

such as wages and signing bonuses, which can then be imposed on the other

62
UAW President Dennis Williams Roundtable (June 18, 2015), available at
https://www.youtube.com/watch?v=bfS3EzxDXqI.

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automakers through pattern bargaining. It follows that the least profitable automaker

is generally the least likely target, as low profit margins make it more difficult for

the union to secure favorable precedential terms.

157. In the 2011 negotiations, GM was the lead and negotiated the first

tentative agreement with the UAW. But, as reflected herein, by that time, the UAW

had been thoroughly corrupted and taken over by FCA. Under ordinary

circumstances with all parties negotiating in good faith, the UAW would have used

its market power to force key elements of the GM deal on FCA, but under these

circumstances, the implementation of the terms of the FCA 2011 CBA was, like the

FCA 2015 CBA, a product of collusion between FCA and the UAW. As noted,

skirting any pattern due to the bribes, FCA reached a secret deal to ensure that in

2015 the Tier Two cap would not be re-instated.

158. Moving to the 2015 negotiations, based on past practices and having

conducted a detailed analysis of the negotiation dynamics, GM reasonably believed

that it would be the target in 2015. Industry analysts also did not believe that FCA

was a viable target. FCA was “the smallest of the three companies, with the lowest

profit margins and the highest percentage of lower-paid entry-level workers seeking

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higher wages,” which would “make it more difficult for the UAW to win big pay

raises for its workers and big signing bonuses.”63

159. On September 13, 2015, just two days before the CBAs were scheduled

to expire, the UAW unexpectedly announced that it had chosen FCA as the “target,”

a position secured through the years-long bribery scheme between FCA Group and

UAW leaders.

160. Informed industry analysts were not expecting UAW’s selection of

FCA as the lead. According to the Detroit Free Press, the decision “surprised

analysts and industry watchers across the nation.” CBS Detroit reported that “just

about every analyst said that Fiat Chrysler was the least likely to be the lead

company.” 64

161. Defendant Williams had near complete control over the selection of the

lead. Williams at Marchionne’s bidding chose FCA as the lead, despite being near a

tentative agreement with GM through his “President’s Demand.” After selecting

63
Alisa Priddle & Brent Snavely, Fiat Chrysler Is Surprise Lead Company in UAW
Talks, DETROIT FREE PRESS (Sept. 13, 2015),
https://www.freep.com/story/money/cars/general-motors/2015/09/13/fiat-chrysl
er-lead-company-uaw-contract-talks/72091592/.
64
Id.; UAW Chooses Fiat Chrysler As Target in Contract Talks, CBS DETROIT
(Sept. 13, 2015),
https://detroit.cbslocal.com/2015/09/13/uaw-chooses-fiat-chrysler-as-target-in-c
ontract-talks/.

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FCA as the lead, Williams refused to explain why he had chosen FCA as the lead

and instead told a GM executive that he would explain why he selected FCA when

he retired. Williams never provided such an explanation. As has been revealed

through the subsequent investigations, Williams chose FCA as the lead in order to

use the FCA pattern agreement to harm GM and force a merger with GM. Williams

made this selection at the direction of Marchionne to further the scheme alleged

herein.

162. On September 15, 2015, just two days after FCA was selected as lead,

FCA and the UAW reported that an agreement had been reached that, in

Marchionne’s words, was a “transformational deal.”65

163. Marchionne explained that the “economics of the deal are almost

irrelevant” because the costs “pale in comparison given the magnitude of the

potential synergies and benefits” of a combination, and cemented a “philosophical

approach that [FCA] wants to use going forward.” Upon information and belief,

65
Alisa Priddle, Marchionne: Deal Can Bring Workers ‘Significant Benefits,’
DETROIT FREE PRESS (Sept. 16, 2015),
https://www.freep.com/story/money/cars/chrysler/2015/09/16/marchionne-healt
h-care-2-tier-wages-part-uaw-pact/32501757/.

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Marchionne was referring to using the collective bargaining process to pressure a

merger between FCA and GM.66

Marchionne Hugging Williams After Announcement of Tentative Deal 67

164. The UAW bargaining team, with Jewell’s authorization, celebrated the

deal with a $6,912.81 dinner at the London Chop House in Detroit—paid for by the

NTC with funds knowingly supplied by FCA—the very entity with which Jewell,

66
2015 UAW FCA Agreement Announcement (Sept. 15, 2015), available at
https://www.youtube.com/watch?v=YX8wWGi28rs.
67
See Editorial, UAW, Chrysler Deal Addresses Key Issues, THE DETROIT NEWS
(Sept. 19, 2015), https://www.detroitnews.com/story/opinion/editorials/
2015/09/19/editorial-wages-union-deal/72481834/.

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Williams, and the UAW bargaining team had been negotiating. 68 The spigot of FCA

payoffs to certain UAW leaders continued to flow.

165. On September 30, 2015, the UAW’s FCA workforce rejected the

tentative agreement negotiated by the FCA and UAW leaders. 69 Various press

reports attributed the rejection to distrust of the union’s leadership by its members.

166. On October 8, 2015, FCA and the UAW announced a new tentative

agreement. Just as with the first tentative agreement, the FCA-UAW CBA deal terms

were structured to force enormous costs on GM. Although the initial tentative

agreement was rejected by the FCA-UAW membership, the new tentative agreement

that was ultimately approved was similar to the initial tentative agreement in terms

of structure and total cost.70 As with the decision to choose FCA as the lead, and the

68
12/12/18 Johnson Gov’t Sentencing Mem., at 5.
69
During bargaining, the UAW negotiates “tentative” agreements with each
automaker. These tentative agreements are then proposed to UAW members, who
vote to approve (“ratify”) or reject the deal. Agreements are not legally effective
until ratification by UAW membership. If a majority of UAW members vote to
reject a tentative agreement, another agreement must then be negotiated and
proposed to UAW membership for ratification. In voting to reject a tentative
agreement, members do not provide a reason for the rejection.
70
As demonstrated by their actions with respect to the second tentative agreement,
the UAW leadership recognized that the failure of the first tentative agreement
was caused by the UAW’s failure in messaging and process more than issues with
the substance of the agreement. See Tracy Samilton, “UAW hopes second time’s
the charm for new contract with FCA” (October 9, 2015)
https://www.michiganradio.org/post/uaw-hopes-second-times-charm-new-contr
act-fca.

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first tentative agreement, this second tentative agreement was structured effectively

as a bribe by FCA to the UAW in return for the UAW’s support for FCA’s hoped-for

merger with GM. GM’s analysis of the final FCA-UAW CBA showed that, as a

pattern for a GM agreement, it would be vastly more expensive than the agreement

GM had negotiated prior to FCA’s selection as lead. In contrast to the UAW’s

“President’s Demand” presented by Defendant Williams to GM during the original

negotiations (under $1 billion), the pattern from the FCA-UAW agreement was

forecast to cost GM more than double the entire “President’s Demand,” with an

estimated cost of nearly $2 billion. The difference between these amounts, which is

easily calculated, is a direct harm Defendants’ scheme imposed on GM through the

2015 CBA.

167. Not only did the 2015 FCA-UAW CBA force enormous costs on GM,

but the deal was structured to particularly harm and weaken GM to further

Marchionne’s goal of forcing a merger with GM. Specifically, the 2015 FCA-UAW

CBA contained large, unanticipated wage increases for Tier One employees. Such

an increase had a disproportionate effect on GM as opposed to FCA given GM’s

larger proportion of Tier One employees (as a result of FCA and the UAW

conspiring to remove the cap on Tier Two employees for FCA). In addition, despite

the large wage increase for Tier One employees, after negotiating the pattern deal

with FCA, the UAW demanded a substantially larger “ratification bonus” to

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consummate a tentative agreement with GM. These onerous demands and

conditions were specifically tailored to, and in fact did, directly harm GM through

increased labor costs. UAW-represented workers greatly benefited from this rich

contract.

168. On October 22, 2015, UAW members ratified the new FCA deal with

77 percent approval. Williams bragged that the deal was one of the “richest ever

negotiated,” saying “the recent bargaining process that took place on behalf of our

members at FCA is a testament to the UAW’s democratic values and commitment

to our members.”71 No one outside of FCA Group and certain UAW leaders knew

that the deal was a product of a long-running, insidious fraud.

169. At the time Williams approved of the FCA terms under which FCA was

paying the UAW double their demand, UAW leaders, including Williams, and FCA

Group leaders knew the federal government was actively investigating past

FCA-UAW CBAs and labor agreements, and potentially other embezzlement of

union funds. GM had no such knowledge. Through this “rich” FCA-UAW labor

contract, Williams and corrupt UAW leaders were able to claim to the public, UAW

members, and government investigators that UAW leadership had obtained

71
Christina Rogers, UAW Ratifies a Richer Deal With Fiat Chrysler, WALL STREET
JOURNAL (Oct. 22, 2015),
https://www.wsj.com/articles/uaw-workers-ratify-deal-with-fiat-chrysler-14455
26840.

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significant FCA concessions that could then be used in pattern negotiation.

Marchionne, in turn, structured and agreed to these CBA terms as a bribe to the

UAW and to force unanticipated higher costs on GM, which had a higher degree of

more costly Tier One workers, and further his takeover scheme. This rich FCA deal

also was a reward to UAW leadership for allowing FCA Group to control the UAW

leaders for the past many years and had the benefit of providing a windfall for UAW

workers.

170. GM, selected as the next target, reached a tentative deal with the UAW

on October 25, 2015, based on the fraudulently tainted FCA-UAW pattern.

Although GM tried to resist the use of the FCA agreement as a pattern and to mitigate

the damage FCA had caused, the threatened risk of a strike proved too great. As

Defendants had no doubt calculated in their corrupt dealings, the economic force of

pattern bargaining and threat of strike forced GM to largely concede FCA’s

agreement as a pattern.

171. The 2015 GM-UAW CBA was ratified by UAW membership on

November 20, 2015 and was effective as of November 23, 2015.

172. Ultimately, although GM was able to mitigate the immediate cost

impact of the FCA pattern by about $400 million through negotiation and

modification of non-core, non-pattern items, it could not and did not change the core,

pattern-based economics of the final CBA between GM and the UAW. The final

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cost was approximately $1.9 billion in incremental labor charges over four years—

over $1 billion more than the deal GM believed it had reached with the UAW before

the UAW’s selection of FCA as the lead.

173. Although GM was able to successfully resist the FCA-UAW leadership

takeover scheme, substantial damage from the racketeering scheme had been

inflicted: direct injuries to GM in the form of higher labor costs that continue to

compound to this day.

174. Failing to consummate Operation Cylinder was a regret Marchionne

took to the grave. An excerpt from a biography of Marchionne states that an FCA

NV-GM merger was “one uncompleted project that Marchionne probably regretted

to the end of his life.”72

V. CO-CONSPIRATORS ASHTON AND IACOBELLI SERVED AS

INFORMANTS TO FCA CAUSING HARM TO GM.
175. In order to further direct the harm specifically at GM and seek to

leverage the 2015 CBA into a forced merger, Defendants, led by Marchionne and

Williams, placed two informants at GM with access to confidential information.

72
Tommaso Ebhardt, The Crisis Fiat Faced As It Lost an Indispensable Leader,
BLOOMBERG BUSINESSWEEK (Apr. 23, 2019),
https://www.bloomberg.com/news/articles/2019-04-23/the-crisis-fiat-faced-as-it
-lost-an-indispensable-leader.

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176. First, although many of the UAW leaders who received bribes from

FCA were members of the FCA Department of the UAW, upon information and

belief, Defendant Ashton, the former Vice President of the GM Department of the

UAW, also received such payments. As noted, upon information and belief, FCA

Group provided Ashton with control over a foreign account at least in the Cayman

Islands in return for his perpetrating and not revealing the scheme against GM.

177. As described above, a key part of the scheme was granting certain cost

savings programs as described herein to FCA, while denying those same programs

to GM. To carry out this scheme, Ashton’s involvement, as the Vice President of

the GM Department, was essential to ensure that GM did not receive the FCA

structural labor programs and related advantages as described herein to impose

higher costs on GM. FCA Group bribed Ashton to carry out his role in the scheme

as noted herein.

178. In June 2014, Ashton resigned as UAW Vice President for GM when

Williams chose Ashton to become the UAW Trust’s nominee to the GM Board. GM

carefully vetted Ashton’s credentials and fitness for Board service, and took

appropriate steps to prevent any conflicts of loyalty. For example, GM determined

that Ashton would be ineligible to join the Board unless he retired from the UAW,

which Ashton did. When he joined the Board, Ashton received an orientation on his

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rights and obligations as a director and signed an agreement to comply with his

fiduciary duties to GM.

179. Ashton, while serving on GM’s Board as a fiduciary, not only failed to

disclose the ongoing scheme between FCA Group and the UAW, and the direct harm

this scheme was designed to and was continuing to cause GM, but, upon information

and belief, Ashton also proceeded to pass confidential GM information to the corrupt

UAW and FCA Group executives. This confidential information included GM’s

strategies and internal positions in connection with the 2015 CBA negotiations.

180. The specific types of information to which Ashton was privy by virtue

of his service on the board are extensive. In 2015 alone, a key period both for CBA

negotiations and GM’s response to FCA Group’s merger request, Ashton received

information showing detailed information on GM’s actual performance and goals

for 2015; early information discussing what GM viewed as the greatest risks in the

coming CBA negotiations (specifically identifying the two-tiered wage structure);

much more detailed discussions of risks and opportunities from the coming CBA

negotiations, including specifically discussions around the tier-two wage structure;

specific discussions of FCA’s merger proposal, including GM’s detailed strategies

for defending against what it viewed as an unattractive proposal. Upon information

and belief, Ashton passed this information to the UAW and FCA, allowing both

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entities to tailor their approaches (both in labor negotiations and in merger efforts)

to inflict maximum pressure on GM.

181. In 2017, after the federal investigation came to light, GM sought to

question Ashton about his knowledge of any wrongdoing. Ashton refused to speak

with GM, which is contrary to the Company’s policy, and instead resigned from the

board.

182. In addition to Ashton, Defendants, again led by Marchionne and

Williams, took steps to install another conspirator inside GM. In June 2015,

Alphons Iacobelli abruptly resigned from FCA, despite having been at the center of

the scheme for years. Shortly after leaving FCA, Iacobelli began reaching out to GM

labor employees, seeking information about GM’s 2015 bargaining. Iacobelli then

spent months requesting that GM hire him in a labor position. At that time, due to

the affirmative actions of Defendants to conceal their fraud, GM had no way of

knowing of Iacobelli’s continued involvement in the long-running scheme to harm

GM. GM hired Iacobelli to work in its labor relations department in January 2016.

183. As an employee of GM’s labor relations department, Iacobelli attended

labor strategy meetings with GM senior leadership, which provided Iacobelli access

to confidential information concerning GM’s labor approaches and strategies. Upon

information and belief, after joining GM, Iacobelli continued to receive or have

control over illicit payments from FCA Group. In return, Iacobelli used his position

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at GM to further the scheme to harm GM by passing to FCA Group the confidential

labor strategy information he was provided with at GM.

184. The placement of Ashton and Iacobelli inside GM was part of the

scheme to directly target GM, causing GM to suffer direct harm from this ongoing

scheme orchestrated at the highest levels of FCA Group. FCA Group succeeded

through the Racketeering Enterprises in driving up GM’s labor costs for years.

VI. FCA NV’S HISTORIC CULTURE OF CORRUPTION AND BRIBERY

AS A BUSINESS TOOL.
185. Far from an aberration or the acts of rogue agents as FCA Group has

proclaimed, the scheme described herein is completely in line with the overriding

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corporate philosophy of FCA NV. This philosophy has been revealed through a

variety of scandals in organizations controlled or connected to FCA NV.

186. For instance, Fiat and its leadership were caught in a vast political

corruption scandal known as Kickback City during the 1990s. This scandal arose

from the discovery that Fiat was paying billions of lire in bribes to government

officials in return for public-work contracts and other political favors. Rather than

owning up to its role in the scandal, from the outset Fiat attempted to use its own

economic clout to shield the company from blame or responsibility. Just as FCA

NV asserts here, during the Kickback City scandal, Fiat claimed that its upper

management had no direct knowledge of the corrupt practices. Despite these claims,

substantial evidence of direct involvement by top managers of Fiat was uncovered

and eventually resulted in the arrest of a Fiat Board Member, finance director, chief

operating officer, and other high-ranking executives of the company. Just as here,

in Kickback City, Fiat followed the same pattern and used illicit financial accounts

in banks in some of the same countries believed to be utilized in the scheme here,

including Switzerland, the Bahamas, and possibly other countries.73

73
Alan Cowell, “Kickback Scandal Convulses Italy” (May 10, 1992)
https://www.nytimes.com/1992/05/10/world/kickback-scandal-convulses-
italy.html (describing bribes being funneled through banks in Switzerland).

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187. Consistent with this culture of corruption, Marchionne was encouraged

and rewarded to commit fraudulent practices to further the business interests of FCA

NV and related companies. FCA NV provided Marchionne with outsize

compensation packages ($72 million in total pay in 2014 for example) despite

documented scandals involving Marchionne. For instance, at FCA, the company

underwent scandals related to the payment of illegal kickbacks to the Iraqi

government (leading to more than $15 million in total fines to the U.S. Government

and the entry of a deferred prosecution agreement), charges of tax evasion (leading

to a fine of 20-30 million Euros), and the hiding of safety data (leading to a

$70 million fine in 2015).

188. As another example, while not part of the scheme aimed at GM or the

pattern of racketeering associated with the enterprises alleged herein, starting in

February 2011, FCA began to systematically overstate its month-end sales figures,

ultimately using the fraud to claim a record-breaking 71-month streak in

year-over-year improvements.

189. Reid Bigland, FCA’s Senior Vice President of Sales and the executive

in charge of the scheme, alleged that Marchionne was intimately involved with the

reporting methodology: “[Bigland] reported directly to the Global Fiat Chrysler

CEO, Sergio Marchionne. . . . [FCA’s] most senior executive and leadership levels,

including Marchionne . . . were well aware of the methodology[.]” Indeed, he alleges

90
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that he “administered the protocol in accordance with best practices he received from

. . . the Global CEO[.]”74

190. In July 2016, FCA was forced to admit its inflated sales scheme, restate

its sales, and acknowledge that the SEC and Department of Justice had launched

investigations into its reporting. On September 27, 2019, the SEC charged FCA with

misleading investors about the number of new vehicles sold each month to customers

in the U.S. FCA agreed to pay $40 million to settle the charges.75

191. “The SEC’s order finds that FCA US inflated new vehicle sales results

by paying dealers to report fake vehicle sales and maintaining a database of actual

but unreported sales, which employees often referred to as a ‘cookie jar.’ In months

when the growth streak would have ended or when FCA US fell short of other

targets, FCA US dipped into the ‘cookie jar’ and reported old sales as if they had

just occurred.”76

192. During many of these ongoing frauds, FCA Group faced tightening

corporate governance requirements in Italy. In 2013, Italy put into place additional

74
First Am. Compl. at 3, 12, Bigland v. FCA N. Am. Holdings, LLC, et al, No.
2:19-cv-11659-GAD-SDD (E.D. Mich. June 12, 2019).
75
U.S. Sec. and Exchange Comm. Press Release, Automaker to Pay $40 Million for
Misleading Investors (Sept. 27, 2019),
https://www.sec.gov/news/press-release/2019-196.
76
Id.

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requirements for adequate internal control and risk management systems, which

were aimed at encouraging the discovery and uncovering of fraud, bribery, and other

malfeasance. Rather than comply with these new requirements and risk the undoing

of its corrupt business practices, in 2014, FCA NV moved its country of

incorporation to the Netherlands. The move to the Netherlands accomplished two

goals: (1) consolidating the power of FCA NV’s controlling shareholders over the

organization and (2) providing greater leeway for FCA’s irregular governance

practices.

193. The Netherlands is well known for its lax taxation and corporate

governance policies. Although Dutch law provides requirements for companies that

incorporate there, companies may disregard such requirements as long as they

explain why they chose to ignore a specific rule of conduct—colloquially referred

to as the “comply or explain” approach. For instance, the Dutch Code contains “best

practice” requirements for the number of independent directors that sit on a board.

Rather than comply with this requirement, FCA NV notes in its SEC filings that it

does not comply with this practice because “two of [its] nine non-executive directors

are not independent[.]” The Dutch Code also requires that FCA NV’s board

committees be made up only of non-executive directors and, at most, one

non-independent director. Contrary to this requirement, FCA NV states in its SEC

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filings that its Governance and Sustainability Committee includes an executive

director, and allows for the possibility of having two non-independent directors. 77

194. FCA likewise maintains lax and insulated corporate governance, with

a board that does not include a single independent director. Each member of the

board of FCA is an employee of the company, with most having multiple roles

throughout FCA Group.

VII. U.S. ATTORNEY IN DETROIT’S CRIMINAL INVESTIGATION

STARTS TO REVEAL THE CORRUPTION

195. In July 2017, the government began unsealing indictments showing a

years-long pattern of corruption and racketeering activity between FCA Group and

certain UAW leaders. As GM later learned, the government’s investigation had been

underway for years before the indictments were released. Defendants were therefore

aware of the investigation and yet continued to carry on and conceal their criminal

conduct.

196. The government has publicly charged and implicated over a dozen FCA

and UAW officials, including the key officials responsible for managing FCA-UAW

labor relations, administering the NTC, and 2015 collective bargaining negotiations.

The charges illustrate the pervasive and deeply rooted “culture of corruption,” as the

77
E.g., Fiat Chrysler Automobiles N.V., 2015 Annual Report, at
https://www.sec.gov/Archives/edgar/data/1605484/000160548416000134/fca20
15123120f.htm.

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government used that description, that prevailed among FCA Group and certain

UAW leaders during their criminal scheme.

197. One by one, each of the FCA and UAW co-conspirators entered guilty

pleas admitting to a brazen scheme to enrich themselves and corrupt the collective

bargaining process through the FCA Control and FCA-NTC Enterprises. Every

official charged to date in the corruption scheme has pled guilty.

198. In those pleas, the co-conspirators admit to a dizzying number of

racketeering acts, including millions in illegal “payments [that] were made in an

effort to obtain benefits, concessions, and advantages for FCA in the negotiation,

implementation, and administration of the collective bargaining agreements between

FCA and the UAW. That is exactly why they were made.”78 These acts, which have

only been admitted, in part, due to the larger bribery scheme involving foreign bank

accounts, were designed to and did pervert the collective bargaining process to the

direct injury of GM.

VIII. FCA GROUP AND ITS CO-CONSPIRATORS CONCEALED THE

CONSPIRACY AND RESULTING DAMAGE, PREVENTING GM
FROM DISCOVERING ITS EARLIER INJURY.

199. GM reasonably, but incorrectly, believed that FCA Group acted in good

faith and negotiated agreements with UAW leadership at arm’s length, including in

78
8/13/18 Iacobelli Sentencing Mem., at 13 (emphasis added).

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2011 and 2015, consistent with FCA and UAW leadership’s obligations under the

Taft-Hartley Act and the UAW Constitution. For example, Williams described the

2015 CBA as a “balanced” agreement that was “a testament to the UAW’s

democratic values and commitment to our members.” 79 Similarly, UAW leaders

held up the 2011 CBA as proof that “cooperation and collective bargaining work.”80

In fact, the UAW recognized the importance of good faith pattern bargaining—

including on October 25, 2015, the day the UAW and GM reached a tentative

agreement—as it “levels the playing field so that companies compete based on the

quality of their product or services and not how much they pay . . . their workers.”

In this way, the UAW assured, “one company cannot gain a competitive advantage

over other companies with wages.”81

200. GM had no way to know that FCA Group had conspired through bribes

to key UAW officials to ensure FCA received illicit competitive advantages

compared to the inflated labor costs that caused GM harm, including, as described

79
Christina Rogers, UAW Ratifies a Richer Deal With Fiat Chrysler, WALL STREET
JOURNAL (Oct. 22, 2015),
https://www.wsj.com/articles/uaw-workers-ratify-deal-with-fiat-chrysler-14455
26840.
80
Joseph Szczesny, Chrysler Agreement with UAW to Add 2,100 New Jobs, DAILY
TRIBUNE (Oct. 12, 2011),
https://www.dailytribune.com/sports/chrysler-agreement-with-uaw-to-add-new-
jobs/article_bc6b64af-c7b8-5518-874d-7d0a6caea35c.html.
81
UAW, Pattern Bargaining (Oct. 25, 2015), https://uaw.org/pattern-bargaining/.

95
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herein, a private agreement dated as early as 2010 to avoid reinstating the 2015 cap

on FCA Tier Two workers, a secret agreement to allow FCA to avoid the contractual

limits on the number of temporary workers, and repeated commitments from UAW

leadership to support FCA’s “World Class Manufacturing” programs while rejecting

GM’s corollary programs.

201. Defendants’ bribery scheme was inherently self-concealing, as secrecy

was essential to perpetuate the scheme. Had Defendants’ violations of the

Taft-Hartley Act been exposed, Defendants would have been investigated and

prosecuted criminally, bringing the scheme to an end. In addition, Defendants

conspired to conceal their bribery scheme from GM (and the world), by adopting

extraordinary measures to obscure the unlawful transactions, the pattern of

racketeering, and the resulting injury to GM. As described herein and as admitted in

the criminal plea agreements, Defendants and their co-conspirators took numerous

active steps to evade suspicion and prevent inquiry into their illegal scheme,

including through misstatements, false testimony, tax fraud, and other contrivances

designed to suppress evidence of wrongdoing. As demonstrated by the length of the

scheme, Defendants’ efforts successfully concealed the scheme and precluded

suspicion of Defendants’ conduct. For example:

(a) FCA officials “used the credit card accounts and the bank

accounts of the NTC to conceal over $1.5 million in prohibited

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payments and things of value paid to officers and employees of

the UAW”;82

(b) The co-conspirators used false-front companies and charitable

organizations run by members of the UAW to secretly funnel

money to other members of the conspiracy for personal use. For

example, between July 2009 and 2015, “Durden conspired and

agreed with Alphons Iacobelli, General Holiefield, Monica

Morgan, . . . and other individuals and entities, to defraud the

United States by using two tax-exempt organizations [the NTC

and the LTLOF] to improperly divert millions of dollars in

unreported income to his co-conspirators, himself and others”;83

(c) Iacobelli, Durden, Morgan, and their co-conspirators used the

LTLOF to “conceal prohibited payments and things of value paid

and delivered to UAW Vice President General Holiefield”;84

(d) Iacobelli (on March 19, 2015), Durden (in February 2011,

November 2011, and May 2012–15), and Morgan (on

82
5/25/18 Brown Plea Agreement, at 3.
83
8/8/17 Durden Plea Agreement, at 3.
84
7/26/17 Iacobelli Indictment, at 9.

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November 3, 2014) filed false tax returns that failed to disclose

hundreds of thousands of dollars in illegal payments;

(e) Between July 2009 and 2015, Durden agreed and conspired with

Iacobelli, Holiefield, Morgan, Mickens, the NTC, the LTLOF,

and other individuals and entities “to impede, impair, obstruct,

and defeat the Internal Revenue Service from ascertaining,

computing, assessing, and collecting taxes,” thereby

“conceal[ing] hundreds of thousands of dollars in illegal

payments made by and on behalf of FCA to UAW officers and

representatives”;85

(f) In February 2010, Marchionne concealed his gift of a

custom-made Terra Cielo Mare watch to Holiefield by

“declar[ing] the goods at less than fifty bucks.” 86 Marchionne

then falsely denied the gift when questioned about it by federal

investigators;

85
6/13/17 Durden Information, at 6.
86
7/13/18 Iacobelli Plea Agreement, at 8.

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(g) “In May of 2011, [Iacobelli] sent an email to [Durden] cautioning

Durden not to put the details of certain expenditures made for the

benefit of [Holiefield] in writing”;87

(h) On December 16, 2015, Brown “provided misleading and

incomplete [grand jury] testimony in a deliberate effort to

conceal the conspiracy to violate the Labor Management

Relations Act by FCA, FCA executives acting in the interest of

FCA, the UAW and UAW officials.”88

(i) From 2014 to 2016, Jewell “knowingly and voluntarily joined

this conspiracy to receive things of value from persons acting in

the interest of FCA . . . knowing that the prohibited payments of

things of value, which were delivered through and concealed by

the [NTC], were willfully made with the intent to benefit” Jewell

and other officials.89 Further, Jewell entered into a “‘culture of

corruption’ that existed between Alphons Iacobelli and other

FCA officials and former UAW Vice President General

87
7/26/17 Iacobelli Indictment, at 20.
88
5/25/18 Brown Plea Agreement, at 5.
89
4/2/19 Jewell Plea Agreement, at 3–4.

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Holiefield and other members of his staff,” involving “corruption

[that] was ongoing and intentionally concealed . . . .”90

(j) The Defendants and other FCA and UAW executives

hold millions of dollars in illicit funds in foreign bank accounts

in countries such as Switzerland, Luxembourg, Liechtenstein,

the Cayman Islands, and others. These funds were put in these

overseas accounts expressly to promote and protect the operation

and control of the RICO Enterprises covertly.

202. It was not until July 2017, when the government announced

indictments of Iacobelli, Morgan, and Durden, with charges following against King,

Johnson, Mickens, Brown, and Jewell, that information was revealed that FCA had

made illegal payments to certain UAW officials. GM diligently monitored the

criminal proceedings and other sources of available information, but GM did not

have sufficient information to indicate whether it might have been injured by

Defendants’ activity or whether it might potentially have a cause of action. At the

same time, Defendants and their co-conspirators continued to take active steps to

conceal their illegal scheme and its effect on GM.

90
Id. at 13.

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203. In 2017 and 2018, in a series of letters and public statements, FCA,

Marchionne, and Williams warranted that their illegal scheme had “nothing

whatsoever to do with the collective bargaining process,” but rather involved other

rogue and bad actors. As has now been revealed, these statements were false, and

were designed to evade suspicion and prevent inquiry into Defendants’ illegal

conduct:

(a) On July 26, 2017, the same day that Iacobelli and Morgan were

indicted, Williams published a letter to UAW members stating:

“The current UAW leadership had absolutely no knowledge of

the alleged fraudulent activities detailed by this indictment until

they were brought to our attention by the government. . . . [T]he

allegations in the indictment in no way call into question the

collective bargaining contracts negotiated by our union during

this period.”91 In fact, Williams himself was directly involved in

the corruption scheme, which was designed to and did corrupt

the collective bargaining process.

(b) On July 26, 2017, FCA published a statement claiming that it

was a “victim[] of malfeasance by certain of [its] employees that

91
Dennis Williams, Letter Regarding DOJ Investigation (July 26, 2017),
https://uaw.org/letter-regarding-doj-investigation/.

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held roles at the [NTC], an independent entity. These egregious

acts were neither known to nor sanctioned by FCA.”92 In fact,

FCA was aware of the illegal payments made by its executives,

who were implementing FCA’s “corporate policy” of bribing

key officials in order to corrupt the collective bargaining process.

A federal court has found that FCA acted as an active

co-conspirator with the NTC and others in this bribery scheme.

(c) Following a day later in what appear to be coordinated

statements, Marchionne published a letter that piggy-backed on

Williams’ false statements: “I join Dennis Williams, the UAW

President, in expressing my disgust at the conduct alleged in the

indictment which constitutes the most egregious breach of trust

by the individuals involved. I also join Dennis in confirming that

this conduct had nothing whatsoever to do with the collective

bargaining process, but rather involved two bad actors . . . .”93

92
FCA, Statement in Response to Department of Justice Investigation
(July 26, 2017),
https://media.fcanorthamerica.com/newsrelease.do?id=18478&mid=.
93
Michael Martinez, Marchionne Expresses ‘Disgust’ Over FCA-UAW Executive
Conspiracy, AUTOMOTIVE NEWS (July 27, 2017),
https://www.autonews.com/article/20170727/OEM02/170729763/marchionne-e
xpresses-disgust-over-fca-uaw-executive-conspiracy.

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Marchionne claimed that the wrongdoing was “neither known

nor sanctioned by FCA.” In reality, Marchionne and Williams

themselves participated in and directed the scheme to corrupt the

collective bargaining process.

(d) On August 1, 2017, Williams published a letter to UAW

members stating: “You should also know that no matter what

anyone says, it was NOT possible for General Holiefield to

compromise or otherwise affect the national negotiations that

resulted in new collective bargaining agreements, including the

2011 collective bargaining agreement between the UAW and

Chrysler.”94

(e) On January 26, 2018, days after Iacobelli pled guilty, Williams

published a letter to UAW members stating: “[T]here is simply

no truth to the claim that this misconduct compromised the

negotiation of our collective bargaining agreement or had any

impact on union funds. . . . [T]he fact is [Iacobelli’s and

corrupted UAW officials’] misdeeds did not affect your

94
Letter to UAW Members from UAW President Dennis Williams (Aug. 1, 2017),
https://uaw.org/letter-to-uaw-members/ (emphasis added).

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collective bargaining agreement and no union funds were

stolen or lost.”95

(f) On May 24, 2018, during a Press Roundtable discussion,

Williams sought to distance himself and UAW leaders from the

criminal investigation, stating that “a few people in the UAW is

not reflective of the leadership.”96

(g) On August 27, 2018, FCA released a statement that it “firmly

restates that it is a victim of illegal conduct by Al Iacobelli and

certain other rogue individuals who formerly held leadership

roles at the [NTC] . . . the conduct of these individuals . . . had

no impact on the collective bargaining process.”97

204. Due to the co-conspirators’ concealment of and misrepresentations

regarding their criminal bribery activity and its effect on the collective bargaining

95
Letter from UAW President Dennis Williams to Members Regarding DOJ Case
(Jan. 26, 2018),
https://uaw.org/letter-uaw-president-dennis-williams-members-regarding-doj-ca
se/ (emphasis added).
96
UAW President Dennis Williams Roundtable (May 24, 2018),
https://uaw.org/final-media-roundtable-uaw-president-dennis-williams/.
97
See Tresa Baldas, Ex-Fiat Chrysler Exec Alphons Iacobelli Gets 5 1/2 Years in
UAW Scandal, DETROIT FREE PRESS (Aug. 27, 2018),
https://www.freep.com/story/money/cars/chrysler/2018/08/27/fca-alphons-iaco
belli-uaw-sentencing/1108849002/ (emphasis added).

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process, it was not until Iacobelli pled guilty on January 22, 2018, and his plea

agreement was released thereafter, that GM uncovered some meaningful details

regarding Defendants’ scheme and its potential impact on GM. Iacobelli’s guilty

plea revealed for the first time that FCA’s illegal payments to UAW officials were

made “in an effort to obtain benefits, concessions, and advantages for FCA in the

negotiation, implementation, and administration of the collective bargaining

agreements between FCA and the UAW.”98 Thereafter, it took substantial research

and analysis to begin to discern the manner and extent to which GM was injured by

Defendants’ illegal conduct.

205. GM did not and could not have reasonably discovered this information

earlier despite due diligence. Defendants’ public statements, filings, and

agreements—which GM reviewed—gave no indication of their illegal activity,

much less its impact on the collective bargaining process and GM. To the contrary,

as described above, Defendants concealed their scheme from detection through

various artifices and outright lies to GM and the public intended to deceive GM and

deter inquiry.

98
7/13/18 Iacobelli Plea Agreement, at 7. (Iacobelli pled guilty on
January 22, 2018, and his plea agreement was filed the next day. Due to a
scrivener’s error, a corrected version was filed on July 13, 2018.)

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CAUSES OF ACTION

First Cause of Action

Violations of the RICO Act—18 U.S.C. § 1962(b)

Against FCA NV, FCA, Iacobelli, Brown, Durden, (collectively, “Control

Defendants”)

206. Plaintiffs hereby incorporate the above allegations by reference as if

fully set forth herein.

207. This claim arises under 18 U.S.C. § 1962(b), which makes it “unlawful

for any person through a pattern of racketeering activity or through collection of an

unlawful debt to acquire or maintain, directly or indirectly, any interest in or control

of any enterprise which is engaged in, or the activities of which affect, interstate or

foreign commerce.”

208. At all relevant times, each Control Defendant was a “person” within the

meaning of 18 U.S.C. § 1961(3).

209. The FCA-UAW Control Enterprise, which constitutes the UAW as a

legal entity, is an enterprise within the meaning of 18 U.S.C. 1961(4).

210. In violation of § 1962(b), Control Defendants acquired control over the

FCA-UAW Control Enterprise through a pattern of racketeering activity.

211. Control Defendants gained control over the FCA-Control Enterprise

through at least the acts of racketeering activity identified below. The multiple acts

of racketeering activity that Control Defendants committed and/or conspired to, or

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aided and abetted in the commission of, were related to each other, were

long-running, and therefore constitute a “pattern of racketeering activity.”

212. By gaining control over the FCA-UAW Control Enterprise through this

pattern of racketeering activity, Control Defendants directly damaged GM by having

the UAW negotiate and structure CBAs and take positions and enter into contracts

and understandings that directly harmed GM as alleged herein, and by directing the

implementation of various aspects of the CBAs as described above.

213. The direct harm to GM was further caused by Defendants’ efforts to

place two conspirators within GM—Defendants Ashton and Iacobelli—on the Board

and in the Labor Relations Department of GM. Through Ashton and Iacobelli,

Defendants were able to receive confidential information about GM’s labor

strategies and its response to FCA Group’s merger overtures. This information

allowed Defendants to further execute their scheme to inflict direct and substantial

harm upon GM.

214. Defendants are accordingly liable to GM for three times its actual

damages as proved at trial plus interest, punitive damages, and attorney’s fees.

Second Cause of Action

Violations of the RICO Act—18 U.S.C. § 1962(c)

Against All Defendants

215. Plaintiffs hereby incorporate the above allegations by reference as if

fully set forth herein.

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216. This claim arises under 18 U.S.C. § 1962(c), which makes it “unlawful

for any person employed by or associated with any enterprise engaged in, or the

activities of which affect, interstate or foreign commerce, to conduct or participate,

directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of

racketeering activity . . . .”

217. At all relevant times, each Defendant was a “person” within the

meaning of 18 U.S.C. § 1961(3), because each Defendant was “capable of holding

a legal or beneficial interest in property.”

218. The FCA-NTC Enterprise was operated as an enterprise by Defendants

since at least July 2009 for the common purpose of directing funds away from the

NTC (and ultimately from FCA Group) and others for the benefit of certain UAW

officials in return for benefits, concessions, and advantages to FCA through driving

higher labor costs for GM as alleged herein. This purpose was achieved through a

variety of related fraudulent schemes.

219. Defendants conducted and participated in the affairs of the FCA-NTC

Enterprise through a pattern of racketeering activity, as defined by 18 U.S.C.

§ 1961(5), consisting of numerous and repeated uses of the interstate mails, wire

communications, and Taft-Hartley violations associated with the NTC, to execute a

scheme to defraud in violation of 18 U.S.C. § 1962(c), through violations of 28

U.S.C. § 186, and through violations of 18 U.S.C. § 1956.

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220. The NTC was used as a tool to carry out the elements of the illegal

schemes and pattern of racketeering of Defendants. The FCA-NTC Enterprise had

an ascertainable structure and purposes beyond the scope and commission of the

predicate acts and conspiracy to commit such acts. The FCA-NTC Enterprise is

separate and distinct from Defendants. The FCA-NTC Enterprise engaged in, and its

activities affected, interstate and foreign commerce by, among other things,

representing and training workers for national automakers and training workers to

participate in an industry that engages in substantial interstate and international trade

through its supply chains and systems of distribution.

221. Defendants, through their agents and co-conspirators conducting the

affairs of the FCA-NTC Enterprise, had the common purpose to secure funds and

directly harm GM to force a merger between GM and FCA as more specifically

alleged herein. Defendants, through their agents and co-conspirators, did so by,

among other things: illegally manipulating the collective bargaining process,

diverting funds from the NTC for the benefit of certain UAW officials, paying bribes

by paying double the price of the 2015 CBA, and diverting additional FCA Group

funds to involved individuals through the use of foreign bank accounts. Defendants

carried out these schemes using the interstate mails and wires in violation of 18

U.S.C. §§ 1341 and 1343 and 29 U.S.C. § 186.

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222. Each Defendant participated in the operation and managed the affairs

of the FCA-NTC Enterprise as described herein by making decisions on behalf of

the enterprise and/or carrying out the decisions of the enterprises, including by

directing, authorizing, demanding, receiving or concealing improper payments

and/or by impacting the collective bargaining process. Each Defendant committed

at least two acts of racketeering activity as identified below. The multiple acts of

racketeering activity which Defendants committed and/or conspired to, or aided and

abetted in the commission of, were related to each other, and were long-running, and

therefore constitute a “pattern of racketeering activity.”

223. As described herein and detailed in the co-conspirators’ criminal

charges, guilty pleas, and sentencing memoranda, Defendants’ predicate acts of

racketeering within the meaning of 18 U.S.C. § 1961(1) include, but are not limited

to:

224. FCA:

(a) Beginning in July 2009, FCA began a long-running scheme of

improper payments to UAW officials, funneled through the

NTC, made by FCA senior executives and agents, including with

the knowledge and approval of Marchionne. All such payments

were made willfully and with the intent to benefit the UAW and

its officials to influence the collective bargaining process and

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directly harm GM, as alleged herein. FCA and its agents used

and directed the use of the mails and wires to further this

fraudulent scheme in violation of 18 U.S.C. §§ 1341 and 1343.

Examples of such improper payments and uses of the mails and

wires made by agents acting in the interest of FCA are set forth

below.

(b) In July 2009, Durden, Iacobelli, and others caused the transfer of

$15,000 in funds from NTC to the LTLOF, an entity controlled

by Holiefield, in violation of 29 U.S.C. § 186.

(c) In 2010, Marchionne provided a watch worth several thousand

dollars to Holiefield with a hand-written note that stated, “Dear

General, I declared the goods at less than fifty bucks. That should

remove any potential conflict,” in violation of 29 U.S.C. § 186.

(d) On at least one occasion between October 2010 and

September 2011, Durden, Iacobelli, and others caused the

transfer of more than $421,960 in funds from NTC to Morgan for

the purchase of personal items, in violation of 29 U.S.C. § 186.

(e) In May 2011, Iacobelli sent an email to Durden cautioning

Durden not to put the details of certain expenditures made for the

benefit of Holiefield in writing. This email was in furtherance of

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Defendants’ fraudulent schemes and was sent via the interstate

wires in violation of 18 U.S.C. § 1343.

(f) On multiple occasions between May 2011 and October 2013,

Iacobelli, Durden, and others authorized the payment of over

$350,000 in personal expenses for Holiefield and Morgan, in

violation of 29 U.S.C. § 186.

(g) On at least one occasion in June 2014, Durden, Iacobelli, and

others caused the transfer of more than $262,000 in funds from

NTC to pay off the mortgage of Holiefield and Morgan, in

violation of 29 U.S.C. § 186.

(h) In 2014, 2015, and 2016, FCA and its agents knowingly

approved the use of tens of thousands of dollars of NTC funds to

pay for expenditures in Palm Springs for the benefit of the UAW

and its officials, in violation of 29 U.S.C. § 186.

(i) With FCA’s knowledge and encouragement, Jewell repeatedly

used a credit card and funds provided to him as Co-Chairman of

the NTC to make extravagant purchases for the benefit of himself

and other high-ranking UAW officials, in violation of 29 U.S.C.

§ 186. Such purchases included $8,926.93 for a two-month stay

at a villa in Palm Springs, California in January and

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February 2016; $6,681.12 for golf, golf club rentals, golf balls,

meals, beer, and liquor at the Indian Canyons Golf Resort in

Palm Springs; $1,259.17 for luxury luggage; $2,182 for an

Italian-made Beretta shotgun; and $468.86 for cigars at Wild

Bill’s Tobacco store. These purchases also included $2,130 of

Disney World theme park tickets for his friend and his friend’s

family; multiple tickets to Universal Studios theme park for his

friends at a cost of $217.26 each; and numerous extravagant

dinners for himself and other UAW officials (such as a $7,500

meal at LG’s Prime Steakhouse in Palm Springs, California; a

$6,200 meal and $6,900 meal at Palm Springs Steak and Chop

Restaurant, and a $7,694 meal at London Chop House in

Detroit).

(j) FCA knowingly approved the use of FCA funds for the personal

benefit of Mickens, including allowing Mickens to spend

thousands of dollars at Best Buy stores purchasing items for his

personal use, in violation of 29 U.S.C. § 186.

225. FCA NV:

(a) Beginning in July 2009, acting through its agent Marchionne,

FCA NV engaged in a pattern of making and approving

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payments and the provision of things of value to UAW leaders,

as described above. Marchionne himself gave improper things of

value to UAW leaders, such as in February 2010, when

Marchionne provided a custom-made watch worth several

thousand dollars to Holiefield. In addition, Marchionne, as the

CEO of FCA NV, and to achieve the ultimate goal of a

combination between GM and FCA NV, instructed high-ranking

FCA executives, including Iacobelli, to make more than

$1.5 million in prohibited payments and things of value directly

and indirectly to top UAW officials. Marchionne made these

payments, and approved other such payments, within the scope

of his employment with and for the benefit of FCA NV. Each of

these payments made and approved by Marchionne were in

violation of 29 U.S.C. § 186.

(b) Further, Marchionne aided and abetted numerous violations of

29 U.S.C. § 186 by directing Iacobelli and other FCA executives

to make payments totaling over $1.5 million to UAW officials in

violation of § 186. Marchionne did so within the scope of his

employment with and for the benefit of FCA NV. Marchionne

affirmatively assisted in these violations through this direction

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and through his oversight and approval of these payments, all in

violation of § 186 and with the specific intent that payments be

made in violation of § 186.

(c) FCA NV, through its agents, granted control over numerous

foreign bank accounts to individual UAW and FCA

co-conspirators. Through this scheme, FCA NV, using

numerous foreign financial institutions and accounts, directed

funds from outside the United States to and for the benefit of

United States citizens, with the intent to promote and further

FCA NV’s and FCA’s unlawful scheme of using the NTC to

direct prohibited payments to UAW officials in an effort to harm

GM. These payments through the foreign bank accounts were

made in violation of 18 U.S.C. § 1956.

226. Alphons Iacobelli:

(a) In July 2009, Iacobelli and others acting in the interest of FCA

and using funds provided to NTC by FCA caused the transfer of

$15,000 in funds from NTC to LTLOF, an entity controlled by

Holiefield, for the benefit of Holiefield in violation of 29 U.S.C.

§ 186.

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(b) In May 2011, Iacobelli authorized the expenditure of more than

$2,100 of NTC funds for Morgan, for the benefit of Holiefield,

and knowing that FCA would ultimately pay for these tickets, in

violation of 29 U.S.C. § 186.

(c) In 2011 and 2012, Iacobelli authorized and directed the

expenditure of more than $435,000 to Wilson’s Diversified

Products, which was owned and/or controlled by Holiefield and

Morgan, to pay for personal purchases by UAW officials,

including Holiefield. Iacobelli authorized and directed this

payment for the benefit of Holiefield, and knowing that FCA

would ultimately pay for this expenditure, in violation of 29

U.S.C. § 186.

(d) Between 2012 and June 2015, Iacobelli authorized the

expenditure of more than $450,000 of NTC funds to pay for

personal purchases by UAW officials, including Holiefield.

Iacobelli authorized and directed these payments for the benefit

of the UAW and its officials, and knowing that these

expenditures were ultimately paid by FCA, in violation of

29 U.S.C. § 186.

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(e) On at least one occasion in June 2014, and with the intent to

benefit the UAW and its officials in order to influence the UAW

in its relations with FCA, Durden, Iacobelli and others acting in

the interest of FCA and using funds provided to NTC by FCA,

caused the transfer of more than $262,000 in funds from NTC to

pay off the mortgage of Holiefield and Morgan, in violation of

29 U.S.C. § 186.

(f) Upon information and belief, Iacobelli received substantial

amounts from FCA and FCA NV in the form of control over

accounts held at financial institutions in Switzerland, Italy,

Singapore, and Liechtenstein, in his own name, the name of a

family member, and the name of a business entity he controls.

These amounts were directed from outside the United States to

and for the benefit of Iacobelli, a United States citizen, with the

intent to promote and further FCA NV’s and FCA’s unlawful

scheme of using the NTC to direct prohibited payments to UAW

officials in an effort to harm GM. Iacobelli received such funds

in violation of 18 U.S.C. § 1956.

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227. Jerome Durden:

(a) In July 2009, Durden and others acting in the interest of FCA and

using funds provided to NTC by FCA caused the transfer of

$15,000 in funds from NTC to LTLOF, an entity controlled by

Holiefield, for the benefit of Holiefield in violation of 29 U.S.C.

§ 186.

(b) On at least one occasion between October 2010 and

September 2011, and with the intent of benefitting the UAW in

order to influence the UAW in its relations with FCA, Durden,

Iacobelli, and others acting in the interest of FCA and using funds

provided to NTC by FCA, caused the transfer of more than

$421,960 in funds from NTC to Morgan, in violation of 29

U.S.C. § 186.

(c) Durden signed and caused to be filed numerous false IRS

Form 990s for the NTC. These filings, which failed to identify

hundreds of thousands of dollars in funds being transferred to

UAW officials and entities associated with them—including

$195,015 in 2010, $543,960 in 2011, $335,852 in 2012,

$145,054 in 2013, and $262,000 in 2014—were necessary to

perpetrate the scheme and avoid its detection by GM. These

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129

Form 990s were filed using either the interstate wires or mails,

in violation of 18 U.S.C. § 1341 and/or § 1343 on at least

February 25, 2011; November 1, 2011; May 15, 2012;

May 14, 2013; May 13, 2014; and May 11, 2015.

(d) Upon information and belief, Durden received substantial

amounts from FCA and FCA NV in the form of control over

accounts held at financial institutions in the Cayman Islands and

Liechtenstein, in his own name and the name of a business entity

he controls. These amounts were directed from outside the

United States to and for the benefit of Durden, a United States

citizen, with the intent to promote and further FCA NV’s and

FCA’s unlawful scheme of using the NTC to direct prohibited

payments to UAW officials in an effort to harm GM. Durden

received such funds in violation of 18 U.S.C. § 1956.

228. Michael Brown:

(a) Brown authorized numerous payments, totaling hundreds of

thousands of dollars to the UAW, in the guise of reimbursements

for 100 percent of the salaries and benefits the UAW paid to

individuals placed on “special assignment” status and members

of the UAW International Staff, knowing that many of those

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129

individuals did no work for the NTC. Each of these payments

was approved as a gift to high-level UAW officials, each in

violation of 29 U.S.C. § 186.

229. Dennis Williams

(a) Upon information belief, Williams received substantial amounts

from FCA and FCA NV in the form of control over accounts held

at financial institutions in Switzerland and Liechtenstein, in his

own name and the name of a charitable entity he controls. These

amounts were directed from outside the United States to and for

the benefit of Williams, a United States citizen, with the intent to

promote and further FCA NV’s and FCA’s unlawful scheme of

using the NTC to direct prohibited payments to UAW officials

in an effort to harm GM. Williams received such funds in

violation of 29 U.S.C. § 186 and 18 U.S.C. § 1956.

(b) During various union functions, Williams partook in extravagant

meals, golf-related expenses, and other luxuries, knowing that

these items were being funded by FCA in violation of 29 U.S.C.

§ 186.

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230. Joseph Ashton:

(a) Upon information and belief, Ashton solicited and received

numerous payments, totaling hundreds of thousands of dollars,

from FCA NV and FCA. These funds are or were held in an

offshore account at least in Cayman Islands. Each of these

payments to Ashton by FCA were in violation of 29 U.S.C.

§ 186.

(b) In addition, the funds in these accounts were directed from

outside the United States to and for the benefit of Ashton, a

United States citizen, with the intent to promote and further FCA

NV’s and FCA’s unlawful scheme of using the NTC to direct

prohibited payments to UAW officials in an effort to harm GM.

Ashton received such funds in violation of 18 U.S.C. § 1956.

231. GM’s injuries were directly and proximately caused by Defendants’

racketeering activities. For example, as alleged herein, FCA Group’s illicit payments

to certain UAW officials, entailing a pattern of racketeering including Taft-Hartley

violations, inflicted billions of dollars of damages on GM, including: (a) injuries

resulting from unique competitive advantages provided FCA but denied to GM to

drive up GM’s costs from July 2009 through 2015, including in connection with

WCM, the proportion of Tier Two workers, and limits on temporary workers; and

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(b) over $1 billion in connection with the ratified 2015 GM-UAW CBA and all of

its resulting direct harms.

232. The direct harm to GM was further caused by Defendants’ efforts to

place two informants within GM—Defendants Ashton and Iacobelli—on the Board

and in the Labor Relations Department of GM. Through Ashton and Iacobelli,

Defendants were able to receive confidential information about GM’s labor

strategies and its response to FCA Group’s merger overtures. This information

allowed Defendants to further execute their scheme to inflict direct and substantial

harm upon GM.

233. Defendants are accordingly liable to GM for three times its actual

damages as proved at trial plus interest, punitive damages, and attorney’s fees.

Third Cause of Action

Violations of the RICO Act—18 U.S.C. § 1962(d)

Against All Defendants

234. Plaintiffs hereby incorporate the above allegations by reference as if

fully set forth herein.

235. This claim arises under 18 U.S.C. § 1962(d), which makes it “unlawful

for any person to conspire to violate any of the provisions of subsection (a), (b), or

(c) of this section.”

236. Defendants further conspired and agreed to violate 18 U.S.C. § 1962(c)

and § 1962(b) in violation of 18 U.S.C. § 1962(d) by knowingly agreeing to adopt

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the goal of further facilitating the operation of the aforementioned FCA-NTC

Enterprise, and by taking and maintaining control of the FCA-UAW Control

Enterprise through a pattern of racketeering and by agreeing to the commission of

multiple predicate acts and overt acts.

237. All Defendants have participated as co-conspirators in these offenses

and have performed acts in furtherance of the conspiracy.

238. Defendants agreed, whether expressly or tacitly, that some person

would commit at least two predicate acts in the course of participating in the affairs

or operations of these enterprises.

239. Each Defendant and other co-conspirator was aware of the essential

scope and nature of the scheme to corruptly operate the FCA-NTC Enterprise and

take and maintain control of the FCA-UAW Control Enterprise.

240. There was no plausible lawful rationale for the manner in which

Defendants and their co-conspirators participated in the affairs of the NTC and the

UAW.

241. GM’s injuries were directly and proximately caused by the unlawful

agreement among these co-conspirators.

242. Under 18 U.S.C. § 1964(c), Plaintiffs are entitled to bring this action

and to recover treble damages, the costs of bringing this suit and reasonable

attorney’s fees.

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129

243. Defendants are accordingly liable to Plaintiffs for three times their

actual damages as proved at trial, punitive damages, plus interest and attorney’s fees.

REQUESTS FOR RELIEF

WHEREFORE, Plaintiffs pray for the following relief:

A. Damages, under RICO, in an amount to be determined at trial, including

but not limited to the billions of dollars in damages GM suffered as a result of

Defendants’ bribery scheme, pattern of racketeering, and other unlawful acts;

B. An award of punitive and/or exemplary damages as Defendants have

acted with malice and willful disregard for GM’s rights;

C. An award of costs and fees incurred in pursuing this litigation,

including attorney’s costs, fees, and the fees and costs of experts;

D. Equitable relief, including restitution; and

E. Any other relief the Court deems just, fair, necessary, or equitable.

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129

Dated: August 3, 2020 Respectfully submitted,

HONIGMAN LLP

By: /s/ Jeffrey K. Lamb

Jeffrey K. Lamb (P76738)
J. Michael Huget (P39150)
Shirin S. Goyal (P82528)
2290 First National Building
660 Woodward Avenue
Detroit, MI 48226
Telephone: (313) 465-7000
jlamb@honigman.com
mhuget@honigman.com
sgoyal@honigman.com

KIRKLAND & ELLIS LLP

By: /s/ Hariklia Karis

Hariklia Karis, P.C.
Jeffrey Willian, P.C.
Casey R. Fronk
Casey McGushin
300 North LaSalle
Chicago, IL 60654
Telephone: (312) 862-2000
hariklia.karis@kirkland.com
jeffrey.willian@kirkland.com
casey.fronk@kirkland.com
casey.mcgushin@kirkland.com

Austin Norris
Maisie Allison
333 South Hope Street
Los Angeles, CA 90071
Telephone: (213) 680-8400
austin.norris@kirkland.com
maisie.allison@kirkland.com

Attorneys for Plaintiffs General Motors LLC

and General Motors Company

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Exhibit B
Case 2:19-cv-13429-PDB-DRG ECF No. 84-3 filed 08/03/20 PageID.3138 Page 2 of 6

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC,

GENERAL MOTORS COMPANY, No. 19-cv-13429

Plaintiffs, Honorable Paul D. Borman

against District Court Judge

FCA US LLC, FIAT CHRYSLER Honorable David R. Grand

AUTOMOBILES N.V., ALPHONS Magistrate Judge
IACOBELLI, JEROME DURDEN,
MICHAEL BROWN,

Defendants.

DECLARATION OF HARIKLIA KARIS

I, Hariklia Karis, hereby declare as follows:

1. I am a partner at the law firm of Kirkland & Ellis LLP. I am an attorney

licensed to practice in the State of Illinois and have been admitted to practice in this

Court.

2. I represent plaintiffs General Motors LLC and General Motors

Company (collectively, “GM”) in the above-captioned case. I began working on

this matter in early 2019. Along with my partner Jeffrey Willian, who joined the

team representing GM in this matter in the late summer of 2019, I have acted as

GM’s lead outside counsel in connection with this matter.

Case 2:19-cv-13429-PDB-DRG ECF No. 84-3 filed 08/03/20 PageID.3139 Page 3 of 6

3. GM’s investigation into the facts underlying its original Complaint and

proposed First Amended Complaint has been led by and conducted through

attorneys at Kirkland & Ellis LLP, including myself, Jeffrey Willian, and others.

The investigation in support of GM’s RICO action continues but, in light of the

Court’s recent ruling, GM must now set forth allegations concerning new facts that

have recently been discovered relating to apparent foreign account activity.

4. The facts were discovered through the use of investigators. GM has

invoked and will continue to invoke the work product doctrine, attorney client

privilege, and other applicable protections as to all aspects of its counsel’s work on

this matter, including as to all investigators, agents and consultants. This declaration

is intended to describe at a high-level, without waiving any applicable privileges or

protections which are expressly reserved, when the new facts that are pled in support

of the proposed Amended Complaint were discovered and why that information was

not previously pled in an Amended Complaint.

5. Prior to filing its Complaint in November 2019, GM’s investigation

into the facts underlying its allegations was extensive. The investigation included

witness interviews, review of relevant publicly available information regarding

criminal developments, close monitoring of the criminal proceedings against

Defendants and their co-conspirators, review and analysis of internal GM documents

and communications, the engagement of consultants, and an in-depth analysis of

Case 2:19-cv-13429-PDB-DRG ECF No. 84-3 filed 08/03/20 PageID.3140 Page 4 of 6

collective bargaining negotiations and related agreements among GM, FCA, and the

UAW since 2009. GM’s investigation continues through today.

6. When GM filed its Complaint on November 20, 2019, and until

recently, there was no reference in the criminal proceedings or other indication that

Defendants FCA US LLC (“FCA”) and Fiat Chrysler Automobiles N.V. (“FCA

NV”) used offshore bank accounts to further their scheme through payouts to

individuals with control and power to directly harm GM.

7. After the Court precluded GM from obtaining discovery from

Defendants and relevant third parties, and as FCA continued to disavow any

involvement in the bribery scheme while at the same time disclosing in its public

filings that it has “engaged in discussions with the DOJ about a potential resolution

of its investigation” arising from the fact that “[s]everal of the individual defendants

have entered guilty pleas and some have claimed in connection with those pleas

that they conspired with FCA US in violation of the Taft-Hartley Act”,1 through

counsel, GM focused its review on FCA N.V.’s and its predecessor’s histories and

governance through informal discovery, including alleged past but related illicit

activities and unlawful conduct. GM came to learn through its investigation that Fiat

and its executives had been involved in what certain publications referred to as

1
See Semi-Annual Report of Fiat Chrysler Automobiles, at 70 (July 31, 2020).
Case 2:19-cv-13429-PDB-DRG ECF No. 84-3 filed 08/03/20 PageID.3141 Page 5 of 6

“Kickback City,” where Fiat S.p.A. apparently used certain foreign accounts to

illicitly pay politicians to obtain commercial contracts.

8. After formal discovery was denied, as part of its ongoing investigation

into the harm caused to GM through the bribery scheme FCA executives had

admitted as well as new facts revealed in the government’s investigation, in mid-

April 2020, GM, through outside counsel, retained and began working with third

party investigators to assist in GM’s investigation. Certain of these third parties, all

of whom have significant credentials supporting their investigative expertise,

recently discovered reliable information indicating the existence of foreign accounts

potentially connected to the scheme alleged in GM’s Complaint, as described below.

9. In the meantime, while the investigation was ongoing and in the

preliminary phases, on May 26, 2020, the Court set an oral argument date on

Defendants’ motions to dismiss. The oral argument was held on June 23, 2020.

After oral argument, the Court issued a ruling that resulted in GM filing an

Emergency Petition for Writ of Mandamus on June 27, 2020. The Sixth Circuit

subsequently stayed this Court’s June 23, 2020 order and granted GM’s writ on July

6, 2020. Two days later, on July 8, 2020, the Court issued its decision granting

Defendants’ motions to dismiss with prejudice.

10. Only very recently, GM’s investigation has uncovered reliable

information concerning the scope and breadth of relevant individuals with foreign
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accounts. Specifically, only within the last 10 days did we obtain sufficiently

reliable information concerning the existence of foreign bank accounts by various

individuals previously and currently employed by FCA and former UAW Presidents

and officers to allege in a public filing as stated in the First Amended Complaint the

scope and significance of the foreign accounts.

11. Despite reasonable diligence in investigating GM’s claim, GM was

previously unable to discover this evidence because it sought to obtain banking

information through formal discovery which the court did not permit to proceed until

after the Defendants’ Motion to Dismiss was resolved. GM, through counsel needed

to identify a reputable investigative firm that could reliably obtain this information,

which took several months especially given COVID limitations.

I declare under penalty of perjury that the foregoing is true and correct to the

best of my knowledge, information, and belief.

Dated: August 3, 2020 /s/ Hariklia Karis, P.C.

Hariklia Karis, P.C.
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Exhibit C
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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC,

GENERAL MOTORS COMPANY, No. 19-cv-13429

Plaintiffs, Honorable Paul D. Borman

against District Court Judge

FCA US LLC, FIAT CHRYSLER Honorable David R. Grand

AUTOMOBILES N.V., ALPHONS Magistrate Judge
IACOBELLI, JEROME DURDEN,
MICHAEL BROWN,

Defendants.

DECLARATION OF JEFFREY L. WILLIAN

I, Jeffrey L. Willian, hereby declare as follows:

1. I am a partner at the law firm of Kirkland & Ellis LLP. I am an attorney

licensed to practice in the State of Illinois and have been admitted to this Court.

2. I represent plaintiffs General Motors LLC and General Motors

Company (collectively, “GM”) in the above-captioned case and have been working

on this matter since the summer of 2019.

3. GM’s investigation into the facts underlying its original Complaint and

proposed First Amended Complaint has been led by and conducted through

attorneys at Kirkland & Ellis LLP, including myself, Hariklia Karis, and others. The
Case 2:19-cv-13429-PDB-DRG ECF No. 84-4 filed 08/03/20 PageID.3145 Page 3 of 6

investigation in support of GM’s RICO action continues but, in light of the Court’s

recent ruling, GM believes it must now allege new facts that it has recently

discovered concerning the existence of foreign accounts that have apparently been

used to further the schemes identified in GM’s original Complaint.

4. These new facts were discovered through the use of third-party

investigators with the assistance and guidance of counsel. GM has invoked and will

continue to invoke the work product doctrine, attorney client privilege, and other

applicable protections as to all aspects of its counsel’s work on this matter, including

as to all investigators, agents, and consultants. The below is intended to describe at

a high-level, without waiving any applicable privileges or protections, all of which

are expressly reserved, when GM acquired sufficient information regarding the

scope, breadth, and apparent use of the foreign accounts alleged in GM’s proposed

First Amended Complaint and why that information was not previously pled.

5. Prior to filing its Complaint in November 2019, GM’s investigation

into the facts underlying its allegations was extensive. The investigation included

witness interviews, review of relevant publicly available information regarding

criminal developments, close monitoring of the criminal proceedings against

Defendants and their co-conspirators, review and analysis of internal GM documents

and communications, the engagement of consultants, and in-depth analysis of

Case 2:19-cv-13429-PDB-DRG ECF No. 84-4 filed 08/03/20 PageID.3146 Page 4 of 6

collective bargaining negotiations and related agreements among GM, FCA, and the

UAW since 2009. GM’s investigation has continued through today.

6. When GM filed its Complaint on November 20, 2019, and until

recently, there was no indication that Defendants FCA US LLC (“FCA”) and Fiat

Chrysler Automobiles N.V. (“FCA NV”) used offshore bank accounts to further

their unlawful scheme. There is no public reference to any such offshore bank

accounts in the criminal proceedings.

7. After the Court precluded GM from obtaining discovery from

Defendants and relevant third parties, and as FCA continued to disavow any

involvement in the bribery scheme while at the same time disclosing in its public

filings that it has “engaged in discussions with the DOJ about a potential resolution

of its investigation” arising from the fact that “[s]everal of the individual defendants

have entered guilty pleas and some have claimed in connection with those pleas

that they conspired with FCA US in violation of the Taft-Hartley Act”,1 through

counsel, GM focused its review on FCA N.V.’s and its successor’s histories and

governance, including alleged past but related illicit activities and unlawful conduct.

GM came to learn through its investigation that Fiat and its executives had been

involved in what certain publications referred to as “Kickback City,” where Fiat

1
See Semi-Annual Report of Fiat Chrysler Automobiles, at 70 (July 31, 2020).
Case 2:19-cv-13429-PDB-DRG ECF No. 84-4 filed 08/03/20 PageID.3147 Page 5 of 6

S.p.A. apparently used certain foreign accounts to illicitly pay politicians to obtain

commercial contracts.

8. In mid-April 2020, after formal discovery was denied and as part of its

ongoing investigation, GM, through outside counsel, retained and began working

with third party investigators to assist in GM’s investigation. Certain of these third

parties, all of whom have significant credentials supporting their investigative

expertise, recently discovered reliable information indicating the existence of

foreign accounts potentially connected to the scheme alleged in GM’s Complaint, as

described below.

9. In the meantime, on May 26, 2020, the Court set an oral argument date

on Defendants’ motions to dismiss. The oral argument was held on June 23, 2020.

After oral argument, the Court issued a ruling that resulted in GM filing an

Emergency Petition for Writ of Mandamus on June 27, 2020. The Sixth Circuit

subsequently stayed this Court’s June 23, 2020 order and granted GM’s writ on July

6, 2020. Two days later, on July 8, 2020, the Court issued its decision granting

Defendants’ motions to dismiss with prejudice.

10. Only recently did GM’s investigation uncover reliable information

concerning the scope and breadth of relevant individuals with foreign accounts.

Specifically, only in the last 10 days did we obtain sufficiently reliable information
Case 2:19-cv-13429-PDB-DRG ECF No. 84-4 filed 08/03/20 PageID.3148 Page 6 of 6

to allege in a public filing as stated in the First Amended Complaint the scope and

significance of the foreign accounts.

11. Despite GM’s diligence in investigating its claims, GM was previously

unable to discover this evidence on the existence and use of foreign accounts,

including because the Court stayed GM’s efforts to obtain banking information

through formal discovery until after the Defendants’ Motion to Dismiss was

resolved. Instead, GM, through counsel, needed to identify a reputable investigative

firm that could reliably obtain this information, which took several months

especially given COVID limitations.

I declare under penalty of perjury that the foregoing is true and correct to the

best of my knowledge, information, and belief.

Dated: August 3, 2020 /s/ Jeffrey L. Willian, P.C.

Jeffrey L. Willian, P.C.
Case 2:19-cv-13429-PDB-DRG ECF No. 84-5 filed 08/03/20 PageID.3149 Page 1 of 2

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

GENERAL MOTORS LLC,

GENERAL MOTORS COMPANY, No. 19-cv-13429

Plaintiffs, Honorable Paul D. Borman

against District Court Judge

FCA US LLC, FIAT CHRYSLER Honorable David R. Grand

AUTOMOBILES N.V., ALPHONS Magistrate Judge
IACOBELLI, JEROME DURDEN,
MICHAEL BROWN,

Defendants.

APPENDIX OF UNPUBLISHED AUTHORITIES

Case 2:19-cv-13429-PDB-DRG ECF No. 84-5 filed 08/03/20 PageID.3150 Page 2 of 2

Attachment Document
1 Belknap v. Bank of Am. Corp.,
2015 WL 1423398 (N.D. Ohio Mar. 27, 2015)
2 Counts v. Gen. Motors, LLC,
2018 WL 5264194 (E.D. Mich. Oct. 23, 2018)
3 Davis v. United States,
2010 WL 5014533 (E.D. Ky. Dec. 3, 2010)
4 KBT Grp., LLC v. City of Eastpointe,
2019 WL 1556194 (E.D. Mich. Apr. 10, 2019)
5 Murphy v. Vaive Wood Prod. Co.,
2019 WL 117337 (E.D. Mich. Jan. 7, 2019)
6 Raymo v. FCA US LLC,
2020 WL 4366061 (E.D. Mich. July 30, 2020)
Case 2:19-cv-13429-PDB-DRG ECF No. 84-6 filed 08/03/20 PageID.3151 Page 1 of 55

Attachment 1
 Case 2:19-cv-13429-PDB-DRG
Belknap ECF No.
v. Bank of America Corp., Not Reported 84-6 (2015)
in F.Supp.3d filed 08/03/20 PageID.3152 Page 2 of 55
2015 WL 1423398

defendant in this lawsuit. (Id. ¶¶ 14–15.) Plaintiffs engaged in

loss mitigation and loan modification with the bank, and the
2015 WL 1423398
foreclosure complaint was dismissed on December 11, 2012.
Only the Westlaw citation is currently available.
(Id. ¶ 16.)
United States District Court,
N.D. Ohio,
Plaintiffs were concerned that their loan had not been
Eastern Division.
permanently modified and, through counsel, sent a Qualified
Douglas BELKNAP, et al., Plaintiffs, Written Request and Notice of Error/Request for Information
v. (“QWR”) to the bank. (Id. ¶¶ 18–20.) Plaintiffs claim that they
BANK OF AMERICA CORP., AKA received an insufficient response to the QWR, remain unable
to remit full payment to the bank, and continue “to suffer from
Bank of America, N.A., Defendant.
Bank of America's inability to respond to the qualified written
No. 1:14–cv–1540. request or complete loan modification.” (Id. ¶ 22.)
|
Signed March 27, 2015. Based on these facts, plaintiffs assert a five count complaint.
Count 1 for violation of the Fair Debt Collection Practices Act
Attorneys and Law Firms (“FDCPA”), 15 U.S.C. § 1692, et seq.; Count 2 for violation
of the Real Estate Settlement Procedures Act (“RESPA”),
Brian D. Flick, Mills Mills Fiely & Lucas–Columbus,
12 U.S.C. § 2605; Count 3 for violation of the Truth
Columbus, OH, for Plaintiffs.
in Lending Act/Regulation X and Z violations (“TILA”);
Bryan T. Kostura, Amanda L. Holzhauer, McGlinchey Count 4 for negligent servicing under the National Mortgage
Stafford–Cleveland, Cleveland, OH, for Defendant. Settlement Consent Judgment; and Count 5 for fraud,
including the bank's “pattern and practice” of misrepresenting
the status of plaintiffs' mortgage account and denying
plaintiffs the opportunity to reinstate the loan. (Compl.¶¶
MEMORANDUM OPINION AND ORDER
23–57.) Defendant contends that plaintiffs' entire complaint
SARA LIOI, District Judge. should be dismissed pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure for failure to state a claim.
*1 Presently before the Court is the motion of defendant
Bank of America to dismiss plaintiffs' complaint for failure to In opposing defendant's motion as to Count 1, plaintiffs
state a claim. (Doc. No. 9.) Plaintiffs have opposed the motion expressly concede that their complaint fails to state a claim
(Doc. No. 10), and defendant has replied (Doc. No. 11). For under the Fair Debt Collections Practices Act:
the reasons contained herein, defendant's motion to dismiss is
granted in part, and denied in part without prejudice.
Plaintiffs would concede based upon
the evidence and allegations in support
I. BACKGROUND provided by [the bank] in their Motion
to Dismiss that [the bank] owns the
Plaintiffs Douglas and Shandra Belknap bring this action note they are attempting to collect that
against Bank of America (the “bank”) in connection with a Plaintiffs' Claim under the Fair Debt
line of credit and mortgage executed in favor of Countrywide Collection Practices Act is barred.
Home Loans on April 20, 2007, with respect to property
plaintiffs own in Gates Mills, Ohio. (Doc. No. 1 [Compl.]
¶¶ 11–12.) After these documents were executed, the bank (Opp'n at 74.)
acquired Countrywide.
Without arguing the law, plaintiffs simply assert that their
On July 17, 2012, a complaint in foreclosure was filed against RESPA claim (Count 2), and fraud claim (Count 5), both
plaintiffs in the Cuyahoga County Court of Common Pleas state plausible claims for relief under the Iqbal/Twombly
by Citibank. Citibank serviced plaintiffs' loan, but is not a standard. With respect to the fraud claim, plaintiffs “concede

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 1

 Case 2:19-cv-13429-PDB-DRG
Belknap ECF No.
v. Bank of America Corp., Not Reported 84-6 (2015)
in F.Supp.3d filed 08/03/20 PageID.3153 Page 3 of 55
2015 WL 1423398

the allegations in the complaint are not the most artfully speculative level [ .]” Bell Atl. Corp. v. Twombly, 550 U.S.
drawn, [but] the Plaintiffs have pled beyond mere notice a 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing
demonstrable pattern of acts by [the bank]” sufficient to pass authorities). In order to survive defendant's motion, plaintiffs'
the Iqbal/Twombly test for fraud. (Opp'n at 76.) complaint must “state a claim to relief that is plausible
on its face” when the factual allegations in the complaint
*2 In opposing the bank's motion, plaintiffs concede that are accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678,
neither Count 3 nor Count 4 state a claim but, as part of their 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly,
opposition, request leave to amend to assert different claims. 550 U.S. at 570). In other words, plaintiffs' complaint must
Plaintiffs have not filed a motion for leave to amend or filed “contain either direct or inferential allegations respecting all
a proposed amended complaint. material elements to sustain a recovery under some viable
legal theory.” DiGeronimo Aggregates, LLC, v. Zelma, 763
Specifically, plaintiffs state that “[t]he Third Claim for Relief F.3d 506, 509 (6th Cir.2014), cert. denied, ––– U.S. ––––, 135
is improperly classified as a TILA violation and should fail S.Ct. 980, 190 L.Ed.2d 835, 2015 WL 133025 (U.S. Jan 12,
as a matter of law.” But while improperly pled as a TILA 2015), (quoting Handy–Clay v. City of Memphis, Tenn., 695
claim, plaintiffs contend that the claim “should be allowed to F.3d 531, 538 (6th Cir.2012) (internal quotations marks and
be amended and reclassified as a claim under RESPA.” (Opp'n citation omitted)).
at 76.)

With respect to the bank's motion to dismiss Count 4, 2. Rule 15

plaintiffs state that: The Court construes plaintiffs' statements in their opposition
as a motion for leave to amend portions of their claims.
Motions for leave to file an amended complaint are reviewed
pursuant to Rule 15(a)(2) of the Federal Rules of Civil
Upon review of [the bank's] Motion
Procedure, which provides that leave to amend should be
to Dismiss, Plaintiff would concede
freely given when justice so requires. Leave to amend
that the controlling language of the
is appropriately denied under a number of circumstances,
National Mortgage Settlement may
including bad faith, undue delay, dilatory motives, undue
indicate that there is no private right
prejudice to the opposing party, repeated failure to cure
of action. However Plaintiff[s] would
deficiencies in prior amendments, and futility. Glazer v.
request an opportunity to amend their
Chase Home Fin. LLC, 704 F.3d 453, 458 (6th Cir.2013)
pleadings as the allegations in this
(quoting Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227,
claim may have given rise to a properly
9 L.Ed.2d 222 (1962)). Courts should freely give leave to
pled breach of contract claim.
amend in the absence of these factors. Foman, 371 U.S. at
182.

(Opp'n at 76.)
*3 The Sixth Circuit has held that “where a more carefully
crafted complaint might state a claim, a plaintiff must be
given at least one chance to amend the complaint before
II. DISCUSSION the district court dismisses the action with prejudice.” U.S.
ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634,
A. Standard of Review 644 (6th Cir.2003) (quoting EEOC v. Ohio Edison Co., 7
F.3d 541, 546 (6th Cir.1993)). This “one chance to amend”
1. Rule 12(b)(6)
may be warranted even if plaintiff fails to file a motion to
A Rule 12(b)(6) motion to dismiss tests the sufficiency of
amend. Id. at 644–45 (amendment permitted without motion
each claim in plaintiffs' complaint. The sufficiency of a
to particularize allegations for purposes of complying with
pleading is tested against the notice pleading requirements of
Rule 9(b)); Empire Title Servs., Inc. v. Fifth Third Mortg. Co.,
Fed.R.Civ.P. 8. Rule 8(a)(2) requires that a pleading contain
298 F.R.D. 528, 531 (N.D.Ohio 2014) (“[T]he Sixth Circuit
“a short and plain statement of the claim showing that the
has recognized that ‘at least three circuits have held that if a
pleader is entitled to relief[.]” The factual allegations in a
complaint is vulnerable to a motion to dismiss, a district court
pleading must be sufficient to “raise a right to relief above the
must first permit the plaintiff to file a curative amendment,

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 2

 Case 2:19-cv-13429-PDB-DRG
Belknap ECF No.
v. Bank of America Corp., Not Reported 84-6 (2015)
in F.Supp.3d filed 08/03/20 PageID.3154 Page 4 of 55
2015 WL 1423398

can be a basis for denying leave to amend, in this case, the

even if the plaintiff does not seek leave to amend.’ [Brown v.
complaint has not been previously amended.
Matauszak, 415 F. App'x 608,] 615 (6th Cir.2011) (emphasis
in original).”).
*4 Plaintiffs' response to defendant's motion to dismiss was
timely, although the Court is concerned about the apparent
B. Analysis lack of analysis that went into selecting the claims originally
Plaintiffs expressly concede that their claim for violation of asserted and that the plaintiffs have readily conceded are not
the Fair Debt Collection Practices Act in Count 1 of the viable. But at this point, there is no evidence of bad faith or
complaint is barred because the bank, having acquired the dilatory motives behind plaintiffs' request to amend. Further,
loan by merger, is collecting its own debt and is not a debt at this early stage of the litigation, the Court can discern no
collector within the meaning of the statute. See 15 U.S.C. § undue prejudice to defendant by permitting the amendment
1692a(6). Accordingly, plaintiffs have failed to state a claim because the original complaint is sufficient to put the bank on
as to Count 1, and defendant's motion to dismiss Count 1 of notice of the claims against it.
plaintiff's complaint is GRANTED.
Accordingly, consistent with Rule 15 and the law of the Sixth
With respect to Count 3, plaintiffs concede that they Circuit, the Court concludes that plaintiffs should be given
have improperly asserted a TILA claim. With respect to an opportunity file an amended complaint. Plaintiffs have not
their negligent servicing claim—Count 4—plaintiffs concede asked for leave to amend counts 2 and 5, although they have
that “the controlling language of the National Mortgage suggested that the TILA claim in Count 3 should really be
Settlement may indicate that there is no private right of recast as a RESPA claim, so it is possible that they intend
action.” Accordingly, plaintiffs have failed to state a claim as to amend their RESPA claim in Count 2. In any event, the
to Count 3—TILA, and Count 4—Negligent Servicing under Court believes that the most efficient way to proceed is to
the National Mortgage Settlement, and defendant's motion to address counts 2 and 5 at the same time as any additional
dismiss Counts 3 and 4 of plaintiffs' complaint is GRANTED. claims that plaintiffs believe, in good faith, may be asserted.
Accordingly, defendant's motion to dismiss counts 2 and 5 of
In conceding Counts 3 and 4, plaintiffs seek leave to the complaint is denied without prejudice, and defendant shall
“reclassify” their former TILA claim as a RESPA claim, have the opportunity to file a motion to dismiss the amended
and to plead a breach of contract claim, although their complaint, if appropriate.
basis for doing so is very thinly described and a proposed
amended complaint has not been filed. Defendant contends
that permitting plaintiffs to amend would be futile because III. CONCLUSION
“their claims fail as a matter of law, no matter what title they
are given[ ]”and would not withstand a motion to dismiss. For the reasons contained herein, defendant's motion to
(Reply at 80.) This may ultimately prove true, but in the dismiss Counts 1, 3 and 4 of plaintiffs' complaint is
absence of a proposed amended complaint, the Court is GRANTED. Defendant's motion to dismiss Counts 2 and 5 of
reluctant to conclude at this time that the amended pleading, the complaint is denied without prejudice.
if filed, will fail as a matter of law.
In keeping with the provisions of Rule 15 and exercise of the
Although not without limits, curing deficiencies in a pleading Court's discretion, plaintiffs are granted leave to file a first
by way of amendment conserves the Court's resources and amended complaint as described herein. Plaintiffs shall file
“is an accepted and expeditious way to more quickly reach their first amended complaint by April 17, 2015.
the merits of a dispute.” In re Bill of Lading Transmission
and Processing Sys. Patent Litig., MDL Docket No. 1:09– IT IS SO ORDERED.
md–2050, Nos. 2:08–cv–862 (D.Utah), 1:09–cv–532, 09–
cv–144 (D.Minn.), 1:09–cv–531, 2010 WL 9459056, at *3
(S.D.Ohio July 15, 2010) (denying motions for judgment on All Citations
the pleadings and granting leave to file amended pleadings).
Not Reported in F.Supp.3d, 2015 WL 1423398
While repeated failures to cure the deficiencies of a pleading

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 3

 Case 2:19-cv-13429-PDB-DRG
Belknap ECF No.
v. Bank of America Corp., Not Reported 84-6 (2015)
in F.Supp.3d filed 08/03/20 PageID.3155 Page 5 of 55
2015 WL 1423398

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 4

Case 2:19-cv-13429-PDB-DRG ECF No. 84-6 filed 08/03/20 PageID.3156 Page 6 of 55

Attachment 2
 Case v.2:19-cv-13429-PDB-DRG
Counts ECF
General Motors, LLC, Not Reported No. Supp.
in Fed. 84-6 (2018)
filed 08/03/20 PageID.3157 Page 7 of 55
RICO Bus.Disp.Guide 13,093

GM installed a “defeat device” in the 2014 Chevrolet Cruze

Diesel which results in significantly higher emissions when
2018 WL 5264194
the vehicle is in use compared to when it is being tested in
United States District Court, E.D.
laboratory conditions.
Michigan, Northern Division.

Jason COUNTS, et al., Plaintiffs, GM filed a motion to dismiss on October 3, 2016, which
v. contended that Plaintiffs' suit should be dismissed because
GENERAL MOTORS, LLC, Robert Bosch Plaintiffs lack standing to bring suit, their claims are
preempted by the Clean Air Act, the primary jurisdiction
GmbH, and Robert Bosch, LLC, Defendants.
doctrine mandates deference to an EPA investigation of the
Case No. 16-cv-12541 claims, and Plaintiffs have failed to state a claim upon which
| relief can be granted. ECF No. 12. The motion was granted
Signed 10/23/2018 in part and denied in part. ECF No. 21. The Court held that
Plaintiffs had standing, that their claims were not preempted
Attorneys and Law Firms by the Clean Air Act (CAA), and that the primary jurisdiction
doctrine was inapplicable. The Court also held that Plaintiffs
Amy L. Marino, Jason J. Thompson, Sommers Schwartz, had not stated a claim for fraudulent misrepresentation
P.C., Southfield, MI, Caroline F. Bartlett, James E. Cecchi, based on statements GM made in its advertising campaign.
Carella, Byrne, Cecchi, Olstein, Brody and Agnello,
However, the Court found that Plaintiffs had stated a claim for
Roseland, NJ, Christopher A. Seeger, Seeger Weiss LLP, fraudulent concealment in that they had sufficiently alleged
Ridgefield Park, NJ, Jessica M. Thompson, Steve W. Berman, that GM had actively concealed the existence of the defeat
Hagens Berman Sobol Shapiro LLP, Seattle, WA, Scott A. device and had exclusive knowledge of the device. Plaintiffs
George, Seeger Weiss LLP, Philadelphia, PA, for Plaintiffs. did not oppose dismissal of their breach of contract claims.
Haley Lorraine Darling, Kirkland and Ellis, LLP, Kathleen
After GM’s motion to dismiss was denied in part, Plaintiffs'
T. Sooy, Rebecca Baden Chaney, April N. Ross, Crowell
counsel initiated another lawsuit involving similar allegations
& Moring LLP, Matthew D. Slater, Cleary Gottlieb
but different diesel vehicles and naming GM as a Defendant.
Steen & Hamilton LLP, Washington, DC, Brittany J.
Mouzourakis, Dykema, Bloomfield Hills, MI, Jeffrey S. In re Duramax Litigation, Case No. 17-cv-11661. That
Bramson, Katherine W. Warner, Renee D. Smith, Leslie complaint also named Bosch, a German company, as a
M. Smith, Kirkland & Ellis, LLP, Chicago, IL, Michael P. Defendant and alleged that certain electronic devices supplied
Cooney, Dykema Gossett, Detroit, MI, Carmine D. Boccuzzi, by Bosch to GM enabled the defeat devices.
Jr., Cleary, Gottlieb, New York, NY, Jonathan E. Lauderbach,
Warner Norcross & Judd, LLP, Midland, MI, Michael G. A series of discovery motions were addressed in Counts,
Brady, William R. Jansen, Warner, Norcross, Southfield, MI, substantial discovery was exchanged, and the scheduling
for Defendants. order was modified. On February 20, 2018, GM and Bosch’s
motions to dismiss were denied in the Duramax case. Case
No. 17-cv-11661, ECF No. 61. The Court concluded that
Plaintiffs had plausibly stated a Racketeer Influenced and
ORDER DENYING ROBERT BOSCH LLC'S
Corrupt Organizations Act (RICO) claim against both GM
MOTION TO DISMISS PLAINTIFFS' FIRST
and Bosch. Id.; 18 U.S.C. § 1961 et seq.
AMENDED CLASS ACTION COMPLAINT

THOMAS L. LUDINGTON, United States District Judge On April 6, 2018, Plaintiffs filed a motion for leave to file
an amended complaint. ECF No. 82. In Plaintiffs' proposed
*1 On June 7, 2016, nine plaintiffs (including first-named first amended complaint, they sought to join Robert Bosch
Plaintiff Jason Counts) filed a 442-page complaint framing GmbH and Robert Bosch LLC (collectively, “Bosch”) as
a putative class-action and alleging deceptive advertising, Defendants, add a RICO claim against all three Defendants,
breach of contract, and fraudulent concealment claims under and add Bosch as Defendants to Plaintiffs' state law claims. In
the laws of thirty states against Defendant General Motors opposing that motion, GM argued that Plaintiffs had actual or
(“GM”). ECF No. 1. Fundamentally, Plaintiffs allege that constructive notice of Bosch’s involvement with GM’s diesel

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 1

 Case v.2:19-cv-13429-PDB-DRG
Counts ECF
General Motors, LLC, Not Reported No. Supp.
in Fed. 84-6 (2018)
filed 08/03/20 PageID.3158 Page 8 of 55
RICO Bus.Disp.Guide 13,093

vehicle production since at least the filing of the complaint in case” doctrine does not apply because the Court has not yet
the Duramax litigation and concluded, apparently, that there addressed the viability of Plaintiffs' RICO claims in this case.
was no basis to include Bosch as a Defendant. GM argued
that Plaintiffs' true motivation behind amending the complaint
was the Court’s denial of GM’s (and Bosch’s) motion to
I.
dismiss a similar RICO claim in the Duramax litigation. GM
argued that this “wait-and-see” approach is disfavored and
should not be rewarded. Finally, GM argued that allowing the A.
amendment would prejudice GM by substantially delaying
Under Rule 12(b)(1), a party may assert lack of subject-matter
the resolution of the case and dramatically altering the
jurisdiction as a defense. “A Rule 12(b)(1) motion for lack
“landscape of the litigation.” Def. Resp. Br. at 18, ECF No.
of subject matter jurisdiction can challenge the sufficiency
86.
of the pleading itself (facial attack) or the factual existence
of subject matter jurisdiction (factual attack).” Cartwright v.
*2 The Court granted the motion to amend and to join
Garner, 751 F.3d 752, 759 (6th Cir. 2014) (citing United
Bosch. ECF No. 93. The Court found that the delay in
filing the motion was reasonable because Plaintiffs sought to States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994) ). “A
include corroborating information learned during discovery facial attack goes to the question of whether the plaintiff
which they believed would strengthen and particularize their has alleged a basis for subject matter jurisdiction, and the
allegations against Bosch. Those allegations were predicated court takes the allegations of the complaint as true for
on internal and confidential material from GM and Bosch purposes of Rule 12(b)(1) analysis.” Id. However, a “factual
which would not have been available to Plaintiffs prior to attack challenges the factual existence of subject matter
discovery. Similarly, the Court found that it was reasonable jurisdiction.” Id. In that case, “the district court has broad
for Plaintiffs to await the Court’s decision in Duramax discretion over what evidence to consider and may look
regarding the viability of the RICO claims before seeking outside the pleadings to determine whether subject-matter
leave to amend, because that approach conserved judicial jurisdiction exists.” Adkisson v. Jacobs Eng'g Grp., Inc., 790
resources rather than wasting them. Finally, the Court found F.3d 641, 647 (6th Cir. 2015). Regardless, “the plaintiff bears
that granting leave to amend would cause no prejudice to the burden of proving that jurisdiction exists.” DLX, Inc. v.
Defendants, other than the “prejudice” that is inherent in Kentucky, 381 F.3d 511, 516 (6th Cir. 2004).
defending complex commercial litigation. On June 11, 2018,
Plaintiffs filed their First Amended Class Action Complaint
(“amended complaint”). ECF Nos. 94–95. B.

Defendant Bosch now moves pursuant to Federal Rules of A pleading fails to state a claim under Rule 12(b)(6) if
Civil Procedure 9(b), 12(b)(1), and 12(b)(6) for dismissal of it does not contain allegations that support recovery under
the amended complaint. ECF No. 108. Defendant GM filed any recognizable legal theory. Ashcroft v. Iqbal, 556 U.S.
a notice of joinder/concurrence in the motion. ECF No. 109. 662, 678 (2009). In considering a Rule 12(b)(6) motion, the
In the motion, Bosch argues that Plaintiffs fail to allege: 1) Court construes the pleading in the non-movant’s favor and
that their injuries were “by reason of” a RICO violation by accepts the allegations of facts therein as true. See Lambert,
Bosch; 2) that they suffered a cognizable RICO injury; 3) that 517 F.3d at 439. The pleader need not provide “detailed
Bosch engaged in a pattern of racketeering activity; 4) that factual allegations” to survive dismissal, but the “obligation to
Bosch participated in the conduct of a RICO enterprise; and provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires
5) the existence of a conspiracy to violate RICO. Plaintiffs more than labels and conclusions, and a formulaic recitation
contend that the Court has already rejected these arguments of the elements of a cause of action will not do.” Bell Atlantic
in Duramax. Bosch responds that it does not seek to relitigate Corp. v. Twombly, 550 U.S. 544, 555 (2007). In essence, the
the Court’s holding in Duramax, but rather seeks to “address pleading “must contain sufficient factual matter, accepted as
deficiencies with Plaintiffs' complaint that were either not true, to state a claim to relief that is plausible on its face” and
before the Court when it decided those earlier motions or that “the tenet that a court must accept as true all of the allegations
were not fully addressed in those proceedings.” Mot. at 1, contained in a complaint is inapplicable to legal conclusions.”
ECF No. 108. Moreover, Bosch argues that the “law of the Iqbal, 556 U.S. at 678–79 (quotations and citation omitted).

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 2

 Case v.2:19-cv-13429-PDB-DRG
Counts ECF
General Motors, LLC, Not Reported No. Supp.
in Fed. 84-6 (2018)
filed 08/03/20 PageID.3159 Page 9 of 55
RICO Bus.Disp.Guide 13,093

only constitutes persuasive (not controlling) authority. This

too is true. As a practical matter, however, this case is a
companion case to Duramax, and arises out of substantially
C.
similar facts. Moreover, the Court’s opinion on the viability of
*3 Federal Rule of Civil Procedure 9(b) provides a a RICO claim in this context has not changed since February
heightened pleading standard for claims of fraud. “In alleging of this year when the Court denied GM and Bosch’s motion
fraud or mistake, a party must state with particularity the to dismiss the Duramax plaintiffs' RICO claim. Thus, absent
circumstances constituting fraud or mistake. Malice, intent, a change in applicable law, a novel argument, or a meaningful
knowledge, and other conditions of a person’s mind may be factual distinction between the allegations in Duramax and
alleged generally.” Id. As explained by the Sixth Circuit in the allegations in the present case, the result will be the same.
Frank v. Dana Corp. 547 F.3d 564 (6th Cir. 2008), claims
of fraud must meet the following requirements: “(1) specify
the statements that the plaintiff contends were fraudulent, A.
(2) identify the speaker, (3) state where and when the
statements were made, and (4) explain why the statements Bosch argues that Plaintiffs fail to allege that they suffered
were fraudulent.” Id. at 569 (citation omitted). At a minimum, a cognizable RICO injury. 1 Plaintiffs may assert a RICO
a claimant must allege “the time, place and contents” of the claim only if they can identify an injury to their “business or
alleged fraud. Id. property by reason of a violation of section 1962.” 18 U.S.C. §
1964(c). In so limiting the scope of RICO standing, Congress
exhibited an intention to exclude “personal injury—that is,
D. an injury ‘to a person, such as a broken bone, a cut, or a
bruise’ or a ‘bodily injury.’ ” Jackson v. Sedgwick Claims
The Racketeer Influenced and Corrupt Organizations Act Mgmt. Servs., Inc., 731 F.3d 556, 564 (6th Cir. 2013) (quoting
establishes bases for both criminal and civil suits. A RICO Black’s Law Dictionary 857 (9th ed. 2009) ). Similarly, a
civil suit may be brought by “[a]ny person injured in his RICO injury must be concrete, not intangible or speculative.
business or property by reason of a violation of section 1962 See Saro v. Brown, 11 F. App'x 387, 389 (6th Cir. 2001);
of this chapter.” 18 U.S.C. § 1964(c). Section 1962 provides see also Fleischhauer v. Feltner, 879 F.2d 1290, 1299 (6th
that: “It shall be unlawful for any person employed by or Cir. 1989) (explaining that RICO plaintiffs must identify a
associated with any enterprise engaged in, or the activities “reasonable and principled basis of recovery” which is “not
of which affect, interstate or foreign commerce, to conduct based upon mere speculation and surmise”); Short v. Janssen
or participate, directly or indirectly, in the conduct of such Pharm., Inc., No. 1:14-CV-1025, 2015 WL 2201713, at *3
enterprise’s affairs through a pattern of racketeering activity (W.D. Mich. May 11, 2015) (“Short must, at a minimum,
or collection of unlawful debt.” Id. at § 1962(c). In other show some direct, pecuniary injury to his own pocket that is
words, a party advancing a civil RICO claim must establish unrelated to the claimed personal injury.”).
their right to sue and then further allege the following
elements: “ ‘(1) conduct (2) of an enterprise (3) through a 1 The Court will discuss Defendant’s arguments in a
pattern (4) of racketeering activity.’ ” Heinrich v. Waiting different order than they were presented. It seems
Angels Adoption Servs., Inc., 668 F.3d 393, 404 (6th Cir. intuitive to first discuss whether Plaintiffs have alleged a
2012) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, cognizable RICO injury, then discuss whether Plaintiffs
496 (1985) ). have alleged a RICO violation (i.e. whether Bosch
engaged in a pattern of racketeering activity; whether
Bosch participated in the conduct of a RICO enterprise;
whether there was a conspiracy to violate RICO). Finally,
II. the Court will discuss whether Plaintiffs have sufficiently
alleged a causal connection between the violation and the
As Bosch correctly underscores, the doctrine of the law of
injury.
the case does not apply to Plaintiffs' RICO claim because the
Court addressed the viability of the RICO claim in Duramax, *4 In Reiter v. Sonotone Corp., the Supreme Court
and not in this case. Bosch suggests that this Court’s opinion interpreted § 4 of the Clayton Act, which authorizes “[a]ny
in Duramax, much like any other district court precedent, person who shall be injured in his business or property” by

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reason of an antitrust law violation to bring suit. 442 U.S. 330, Bridgestone (where only some tires exhibited the defect),
337 (1979). The Supreme Court held that “where petitioner the alleged injury occurred every time a Duramax vehicle
alleges a wrongful deprivation of her money because the was purchased. The amount by which Plaintiffs overpaid
price of the hearing aid she bought was artificially inflated is not contingent on a future occurrence or on the vagaries
by reason of respondents' anticompetitive conduct, she has of the free market. It occurred and became determinable
alleged an injury in her ‘property’ under § 4.” Id. at 342. That at the moment the Plaintiffs paid a premium for a vehicle
holding did not involve the RICO statute, but the Sixth Circuit component which did not work as had been represented.
has held that “Reiter’s common-sense observation about § 4 Plaintiffs experienced a financial property loss at that
applies with equal logical force to § 1964(c).” Jackson, 731 moment, which distinguishes the present case from others
F.3d at 564. where the overpayment or diminution in value had not yet
occurred. Compare Bridgestone, 155 F. Supp. 2d at 1093
Bosch takes issue with the three types of injuries identified & n.26; Gelt, 27 F.3d at 769, with Bailey, 992 F. Supp 3d
by Plaintiffs: 1) “future attempted repairs, future additional at 580–81. This is a cognizable RICO injury.
costs, decreased performance of the vehicle, and diminished
value of the vehicle,” 2) harm caused from “unwittingly Duramax, 298 F. Supp. 3d at 1071.
driv[ing] vehicles that were polluting in volumes and
manners a reasonable consumer would not expect,” and 3) Similarly, Plaintiffs in this case allege that they paid a diesel
“[o]verpayment for [Subject] Vehicles” because the “price for premium of $2,400 because the price of the vehicle was
the vehicles was artificially inflated” by a “diesel premium inflated by Defendants' fraudulent conduct (conduct which
of $2,400.” Mot. at 19 (citing Compl. ¶¶ 28-37, 219, 284). will be discussed below). Compl. ¶ 284. Bosch nevertheless
With respect to future attempted repairs, future costs, and asks the Court to revisit its holding, citing to the Ignition
diminished future performance or value, this Court held in Switch litigation. Mot. at 21 (citing See Ignition Switch,
Duramax that such injuries are too speculative to constitute 2016 WL 3920353, at *7, 16). As noted in the Duramax
a cognizable RICO injury. In re Duramax Diesel Litig., 298 opinion, the Ignition Switch opinion does appear to support a
F. Supp. 3d 1037, 1071 (E.D. Mich. 2018). With respect conclusion contrary to the conclusion reached by this Court.
to “unwittingly driv[ing]” polluting vehicles, this Court This Court nevertheless rejected the Ignition Switch litigation,
previously held (in Counts ) in its order granting GM’s as explained fully in Duramax. Duramax, 298 F. Supp. 3d
motion to dismiss in part that such environmental harms are at 1072. That explanation still obtains. Notably, the Ignition
insufficient to support Article III standing under Lujan v. Switch is an unreported district court opinion from another
Defs. of Wildlife, 504 U.S. 555, 560–61(1992). Order at 10, circuit which relied heavily on the Second Circuit’s opinion
ECF No. 21. This Court did hold in Duramax, however, that in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d
overpayment for the vehicles constitutes a cognizable RICO Cir. 2008).
injury:
*5 Recently, two other district courts have rejected the injury
Plaintiffs' first alleged injury clearly suffices to create analysis in both Ignition Switch and Mclaughlin and have held
RICO standing. Plaintiffs contend that they “paid a that overpayment due to deceptive conduct may constitute
premium of nearly $9,000, as GM charged more for its a RICO injury. See In re Chrysler-Dodge-Jeep Ecodiesel
Duramax engine than a comparable gas car.” Con. Am. Mktg., Sales Practices, & Prod. Liab. Litig., 295 F. Supp. 3d
Compl. at 115. Plaintiffs thus identify a specific payment 927, 959 (N.D. Cal. 2018) (rejecting the defendants' reliance
attributable directly to the vehicle component at issue on Ignition Switch and Mclaughlin and noting that “when a
which they opted to purchase on the basis of fraudulent plaintiff alleges that he or she overpaid for a good or service
conduct. This is cognizable out-of-pocket injury: “[T]he because of anticompetitive or deceptive conduct, the Supreme
price of the [Duramax engine-equipped vehicle which Court’s decision in Reiter and the Ninth Circuit’s decision in
Plaintiffs] bought was artificially inflated by reason of Canyon County support that such an injury is one to property
[Defendants' fraudulent] conduct.” Reiter, 442 U.S. at not merely expectation interests. Those decisions bind this
342. See also Jackson, 731 F.3d at 564; Canyon Cty. v. Court; McLaughlin and [Ignition Switch] do not.”) (internal
Syngenta Seeds, Inc., 519 F.3d 969, 976 (9th Cir. 2008). citations and quotations omitted); Nemet v. Volkswagen Group
Accepting Plaintiffs' allegations as true, the fraud (and of America, Inc., No. 3:17-cv-04372-CRB, Dkt. No. 5374
thus overcharge) occurred at the time the purchase was (N.D. Cal.) (“Bosch relies on certain out-of-circuit decisions
made. See Bailey, 992 F. Supp. 2d at 579. Unlike in in which courts have held that when consumers do not receive

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the benefit of their bargain the injury they suffer is one to of the alleged defeat device. The reason the Court found
their expectation interests, not to their business or property that the former allegation was sufficiently concrete was not
as RICO requires ... As the district court in Chrysler recently because the Plaintiffs attached a specific dollar amount to
noted, the Supreme Court’s decision in Reiter and the Ninth it ($9,000 in Duramax¸ and $2,400 in this case). Rather,
Circuit’s decision in Canyon County support the opposite: that the former allegation is more concrete because it is not
when a plaintiff alleges that he or she overpaid for a good or premised on Plaintiffs' subjective willingness to pay or on
service because of anticompetitive or deceptive conduct, ... the hypothetical new market value for a “dirty” diesel engine
such an injury is one to property, not merely expectation (the product as allegedly delivered) as opposed to a “clean”
interests. The Court therefore does not follow McLaughlin diesel engine (allegedly a non-existent product). Rather, it
and [Ignition Switch] here.”) (internal citations and quotations is premised on a premium that GM itself allegedly charged
omitted). for a diesel engine knowing that it would not perform as
represented. This is a cognizable RICO injury.
Finally, Bosch takes issue with the overpayment theory by
identifying what they suggest is an internal inconsistency in
the Duramax opinion:
B.
This Court in Duramax found that “overpayment” for the
*6 Bosch contends that Plaintiffs fail to allege that Bosch
“vehicle component at issue” conferred RICO standing.
engaged in a pattern of racketeering activity. Pursuant to
See 298 F. Supp. 3d at 1071-72. But, in considering
§ 1961(d), a “ ‘pattern of racketeering activity’ requires
a related theory of RICO injury, the Court also noted
at least two acts of racketeering activity, one of which
that the Duramax plaintiffs' “contention that they ‘would
occurred after the effective date of this chapter and the
have paid substantially less’ [for their vehicles had they
last of which occurred within ten years (excluding any
known of the higher emissions] appears to be premised on
period of imprisonment) after the commission of a prior
some approximation of what the new market value for the
act of racketeering activity.” Plaintiffs must allege that each
vehicles would have been” and that “[d]etermining what
Defendant engaged in two predicate acts of racketeering
that decrease in value would have been seems hopelessly
activity. See Kerrigan v. ViSalus, Inc., 112 F.Supp.3d 580, 605
speculative.” Id. at 1071 (emphasis added). Plaintiffs'
(E.D. Mich. 2015). See also Crest Const. II, Inc. v. Doe, 660
“overpayment” theory requires the same speculation,
F.3d 346, 358 (8th Cir. 2011); Guaranteed Rate, Inc. v. Barr,
because it too is nothing more than a claim that Plaintiffs
912 F.Supp.2d 671, 684 (N.D. Ill. 2012).
“would have paid substantially less” for the Subject
Vehicles under different circumstances. See Compl. ¶ 284
Here, as in Duramax, the Plaintiffs alleged predicate acts of
(“Plaintiffs would not have paid a diesel premium of
mail and wire fraud. As the Court noted in Duramax,
$2,400, if proper disclosures had been made.”). Nor is
the speculation rendered concrete by attaching the $2,400 To state a claim based on mail or wire fraud, the Plaintiffs
number to it, because the $2,400 figure is itself the must allege the following three elements: “(1) devising or
product of Plaintiffs' speculation. Plaintiffs declare $2,400 intending to devise a scheme to defraud (or to perform
to be the price difference between a “diesel Cruze” and a specified fraudulent acts); (2) involving a use of the
“comparable gas car,” Compl. ¶ 217, but they also concede mails; and (3) for the purpose of executing the scheme or
– as they must – that there are many differences between attempting to do so.” United States v. Kennedy, 714 F.3d
diesel and gas vehicles other than NOx emissions: “diesel 951, 958 (6th Cir. 2013) (quoting United States v. Frost,
engines generally produce greater torque, low-end power, 125 F.3d 346, 354 (6th Cir. 1997) ). The Plaintiffs must
better drivability, and much higher fuel efficiency” than allege that Defendants possessed the “specific intent to
gasoline engines, id. ¶ 4. Plaintiffs thus fail to allege a deceive or defraud.” Frost, 125 F.3d at 354. The “scheme
supposed “diesel premium” attributable to NOx emissions to defraud must involve ‘misrepresentations or omissions
performance, the subject of the claimed fraud. reasonably calculated to deceive persons of ordinary
prudence and comprehension.’ ” Bender v. Southland
Mot. at 21-22. Contrary to Bosch’s assertion, the allegation
Corp., 749 F.2d 1205, 1216 (6th Cir. 1984) (quoting United
that GM charged an artificially inflated premium for the
States v. Van Dyke, 605 F.2d 220, 225 (6th Cir. 1979) ). The
vehicles is distinct from Plaintiffs allegation that they “would
Plaintiffs need not show “actual reliance,” but the Plaintiffs
have paid substantially less” for the vehicles had they known

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must demonstrate that the misrepresentations or omissions *7 Bosch contends that its alleged act of supplying the
were “material.” United States v. Daniel, 329 F.3d 480, 487 EDC17 for the subject vehicles is insufficient to raise an
(6th Cir. 2003). Specific intent to defraud or deceive exists inference that Bosch had the specific intent to defraud
if “the defendant by material misrepresentations intends the Plaintiffs, because the EDC17 or similar device is present
victim to accept a substantial risk that otherwise would not in every modern automobile engine. Mot. at 24–25 (quoting
have been taken.” Id. at 488. In re Volkswagen “Clean Diesel” Mktg., Sales Practices,
& Prods. Liab. Litig, MDL No. 2672, 2017 WL 4890594,
Importantly, “[a] defendant may commit mail fraud even if at *2 (N.D. Cal. Oct. 30, 2017) ) (“The EDC17 is not
he personally has not used the mails.” Frost, 125 F.3d at 354 inherently a tool for deceit; it is widely used by automakers
(citing United States v. Griffith, 17 F.3d 865, 874 (6th Cir. that operate modern diesel engines.”) (emphasis in original).
1994) ). “A mail fraud conviction requires only a showing Simply put, every modern vehicle may indeed have an EDC17
that the defendant acted with knowledge that use of the or a similar system, but not all EDC17’s are necessarily
mails would follow in the ordinary course of business, or designed and equipped with defeat devices, as is alleged here.
that a reasonable person would have foreseen use of the As this Court noted in Duramax, Bosch’s specific intent to
mails.” Id. In other words, there is no requirement that the defraud customers “can be inferred from the nature of the
defendant have actually intended that the mails (or wire) alleged conduct. The way in which EDC17 interacted with the
be used. Id. And, further, “ ‘[t]he mailings may be innocent Duramax engine is inherently deceptive. The alleged purpose
or even legally necessary.’ ” Id.(quoting United States v. of the device is to provide the perception of reduced emissions
Oldfield, 859 F.2d 392, 400 (6th Cir. 1988) ). The use of while avoiding the reality of reduced emissions.” Duramax,
the mails “ ‘need only be closely related to the scheme 298 F. Supp. 3d at 1083.
and reasonably foreseeable as a result of the defendant’s
actions.’ ” Id. (quoting Oldfield, 859 F.2d at 400). Bosch contends that “unlike in Duramax, Plaintiffs here
allege only scant facts about how the alleged ‘defeat device
“When pleading predicate acts of mail or wire fraud, in
works,’ and none that supports the conclusory assertion
order to satisfy the heightened pleading requirements of
that Bosch LLC knew that the Subject Vehicles contained
Rule 9(b), a plaintiff must ‘(1) specify the statements that
these unspecified defeat devices.” Mot. at 25 (emphasis
the plaintiff contends were fraudulent, (2) identify the
in original). Bosch underscores paragraphs 126-148 of the
speaker, (3) state where and when the statements were
Duramax complaint, in which the plaintiffs set forth details
made, and (4) explain why the statements were fraudulent.’
concerning testing that was performed on the subject vehicles.
” Heinrich, 668 F.3d at 404 (quoting Frank v. Dana Corp.,
Bosch contends that no such details are present here. Those
547 F.3d 564, 570 (6th Cir. 2008) ).
allegations were unnecessary to sustain the plaintiffs' RICO
In re Duramax Diesel Litig., 298 F. Supp. 3d 1037, 1083 (E.D. claim in Duramax, and indeed were entirely absent from the
Mich. 2018). Court’s discussion of predicate acts of racketeering activity.
Thus, their absence from the current amended complaint is of
Bosch argues that Plaintiffs have alleged no facts that allow no significance. The allegations set forth above are sufficient
the Court to infer that Bosch specifically intended to defraud to raise an inference that Bosch knew that the subject vehicles
them. Mot. at 23. Rather, Bosch contends that Plaintiffs contained the defeat devices. The amended complaint alleges
have offered nothing more than conclusions and unfounded that Bosch designed the EDC17 containing the defeat device
allegations. Mot. at 23-24. To the contrary, Plaintiffs allege and had exclusive control thereof. See Am. Compl. ¶¶
that Bosch “actively participated in the development of the 148, 165, 167, 248. As stated in Duramax, “Defendants
defeat device.” Am. Compl. ¶ 165, ECF No. 94. Plaintiffs cannot reasonably argue that the deceptive nature of EDC17
allege that the EDC17 “controls every parameter that is was unanticipated or unintended, and even if they do, that
important for effective, low-emission combustion.” Id. ¶ 167. argument should be resolved only by a jury. Plaintiffs have
Plaintiffs further allege that the EDC17 is equipped with plausibly alleged that the purpose of EDC17 was deception,
a defeat device, that Bosch “exerts near-total control” over and so Defendants' protestations that it has an innocent and
the EDC17, and that the EDC17 is designed “to prevent lawful purpose are non-cognizable at the pleading stage.”
customers, like GM, from making significant changes on their Duramax, 298 F. Supp. 3d at 1083.
own.” Compl. ¶¶ 147, 248.

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Bosch also argues that Plaintiffs have failed to allege the to defraud include affirmative misrepresentations concerning
predicate acts of mail or wire fraud because Plaintiffs have the operation of the emissions technology, the importance of
identified no actionable misrepresentation or omission by which was explained in Duramax:
Bosch. Bosch argues that, in order to proceed under an
omission theory, Plaintiffs must allege the existence of an If Plaintiffs were relying on these advertisements as the
independent legal duty to disclose information. In Duramax, basis for its claim of fraud, then Defendants' arguments
the Court surveyed the applicable authority and found no such regarding puffery and duty to disclose would become
requirement. Id. at 1085. Although the defendants did identify relevant. However, these representations do not constitute
some non-controlling precedent in support of their position the fraudulent scheme; they merely further it. The level
that a fraudulent omission theory requires an independent of emissions produced by a diesel engine was a material
duty to disclose, the Court concluded that the more recent and consideration for consumers purchasing a vehicle. GM’s
better reasoned cases supported the opposite conclusion. Id. extensive advertising which emphasized the low emissions
That conclusion still obtains. and environmentally-friendly nature of its “clean diesel”
engine underscores its understanding of that fact. Thus,
Bosch now cites to Jamieson, which Bosch contends regardless of whether these advertisements would be
conclusively establishes that fraud by omission requires an actionable on their own, they were material to the scheme.
affirmative duty to disclose information. Mot. at 28 (citing The advertisements urged consumers to buy Duramax
United States v. Jamieson, 427 F.3d 394, 415 (6th Cir. vehicles because they were environmentally friendly even
2005) ) (reviewing conviction for conspiracy to commit mail though the Defendants had purposefully worked together
fraud). Not so. In fact, the Sixth Circuit rejected Jamieson’s to obfuscate the true level of emissions. Plaintiffs have
contention that the trial court should have instructed the jury specifically identified a number of communications that
concerning a “duty to disclose.” United States v. Jamieson, were “reasonably calculated to deceive persons of ordinary
427 F.3d at 415 (“Even if the trial court’s refusal to give prudence and comprehension.” The communications
the ‘duty to disclose’ instruction was error, the error must themselves may not have been demonstrably fraudulent,
be considered harmless.”) (emphasis added). Thus, the Sixth but they were intended to increase the likelihood that
Circuit did not affirmatively state that the failure to give the consumers would purchase Duramax vehicles because they
“duty to disclose” instruction was erroneous. In fact, the Sixth produced emissions at a low level, when in fact the true
Circuit shied away from doing so (perhaps due to the lack of level of emissions was much higher. The nondisclosure
precedent on point, as this Court noted in Duramax ). of the true operation of the Duramax engine was material
precisely because GM worked so hard to convince
*8 The Sixth Circuit found that the district court’s consumers that it was a “clean diesel” engine.
instruction “adequately guards against the jury finding that
Duramax, 298 F. Supp. 3d at 1084.
a simple omission, independent of any other statements
encouraging trust and confidence in the defendant, can
Here, Plaintiffs allege that the EDC17 is equipped with a
constitute fraud.” Id. This dicta suggests that, in the Sixth
defeat device, that Bosch “exerts near-total control” over
Circuit’s opinion, a “simple omission” on its own cannot
the EDC17, and that the EDC17 was designed “to prevent
constitute fraud. Contrary to Bosch’s contention, however,
customers, like GM, from making significant changes on
this dicta does not rise to the level of a “holding” that
their own.” Compl. ¶¶ 147, 248. Plaintiffs also allege that
“something more than a ‘simple omission’ is required before
Bosch and GM worked together to develop and implement a
that omission is actionable as mail or wire fraud.” Mot. at 28.
specific set of software algorithms in the Affected Vehicles
No such holding is present in Jamieson, and even the dicta in
to reduce emissions in testing environments but not on the
Jamieson is unsupported by any citation to controlling law.
road. Id. ¶ 158.Bosch also allegedly engaged in marketing
and lobbying efforts in the United States to get regulators
Even if such a holding could be derived from Jamieson, it
to approve “clean diesel.” ¶ 42. Id. Bosch allegedly took
would not warrant a conclusion contrary to the one reached
these actions with knowledge of the engine’s true operation,
in Duramax. The “simple omission” alleged in this case is
and under circumstances where its alleged co-conspirator had
not “independent of any other statements encouraging trust
actively marketed the engine’s emissions reduction capability.
and confidence in the defendant.” Jamieson, 427 F.3d at
For the same reasons discussed in Duramax and above,
415. Rather, the factual predicates giving rise to the scheme

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these constitute sufficient predicate acts to give rise to RICO

liability.
Plaintiffs' allegations characterize
EDC17 as performing an inherently
C. deceptive function. Thus, the
operation of EDC17 is the
Additionally, Bosch argues that Plaintiffs do not plead a apparent heart of the fraudulent
plausible claim that Bosch participated in the conduct of the enterprise and, because Bosch
alleged enterprise by either “making decisions on behalf of bears primary responsibility for
the enterprise or by knowingly carrying them out.” Mot. at programming EDC17, it “knowingly
30–31 (citing Duramax, 298 F. Supp. 3d at 1086). carried ... out” core aspects of the
alleged enterprise.
*9 In Reves v. Ernst & Young, the Supreme Court
addressed the requirement that a RICO defendant “conduct
or participate, directly or indirectly, in the conduct of such Duramax, 298 F. Supp. 3d at 1087. The same allegations
enterprise’s affairs.” 507 U.S. 170, 179, 113 S.Ct. 1163, 122 are present here concerning Bosch’s primary responsibility
L.Ed.2d 525 (1993) (quoting§ 1962(c) ). The Court explained: for programming the EDC17, as detailed above. Accordingly,
Plaintiffs' allegations are adequate. Bosch’s argument for
Once we understand the word “conduct” to require some
distinguishing Duramax is not persuasive. Bosch argues that:
degree of direction and the word “participate” to require
some part in that direction, the meaning of § 1962(c) comes Unlike in Duramax, Plaintiffs have incorporated
into focus. In order to “participate, directly or indirectly, documents into the Complaint that demonstrate there was
in the conduct of such enterprise’s affairs,” one must have no fraudulent enterprise between GM and Bosch LLC. See
some part in directing those affairs. Of course, the word Compl. ¶¶ 149-58. Such documents show nothing more
“participate” makes clear that RICO liability is not limited than back-and-forth between manufacturer and supplier
to those with primary responsibility for the enterprise’s during an ongoing development process. See, e.g., Compl.
affairs, just as the phrase “directly or indirectly” makes ¶ 156 (citing GMCOUNTS000023551, an email chain in
clear that RICO liability is not limited to those with a which a GM employee circulated an innocuous meeting
formal position in the enterprise, but some part in directing agenda among GM and Bosch engineers). And as discussed
the enterprise’s affairs is required. above, intent cannot be inferred simply by supplying the
EDC-17. Supra p. 24-25.
Id.
Many months and tens of thousands of documents into
“[L]iability [under § 1962(c) ] depends on showing that
discovery, Plaintiffs cannot cite even one document
the defendants conducted or participated in the conduct of
demonstrating that Bosch LLC knowingly carried out
the “enterprise’s affairs,” not just their own affairs.” Id.
the supposed objectives of the alleged RICO enterprise.
at 185, 113 S.Ct. 1163. “Although Reves does not explain
Unable to support their weighty allegations, Plaintiffs
what it means to have some part in directing the enterprise’s
instead resort to a familiar and defective crutch:
affairs, subsequent decisions from our sister circuits have
“information and belief.” See Compl. ¶¶ 156 (referencing
persuasively explained that it can be accomplished either
an unremarkable document but alleging “[o]n information
by making decisions on behalf of the enterprise or by
and belief, discussions at these regular meetings included
knowingly carrying them out.” United States v. Fowler, 535
developing and concealing defeat devices for the [Subject]
F.3d 408, 418 (6th Cir. 2008).
Vehicles.”), 157 (similar, but alleging “[o]n information
and belief, AECD disclosures drafted by Bosch GmbH and
In Duramax, this Court concluded that the plaintiffs had
Bosch LLC were deceptive and false when submitted by
adequately alleged that Bosch participated in the conduct of
GM to regulators.”).
a RICO enterprise:
*10 Id.

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Bosch contends that the documents incorporated by reference document cuts the opposite way, suggesting that it has no
in Plaintiffs' complaint “show nothing more than back- evidentiary value at all. That document, though potentially
and-forth between manufacturer and supplier during an illustrative of some alleged communication between GM
ongoing development process.” Therefore, Bosch concludes and Bosch, is by no means central to Plaintiffs' claim that
that the documents “demonstrate that there was no fraudulent Bosch participated in the conduct of a RICO enterprise.
enterprise between GM and Bosch LLC.” This conclusion Plaintiffs' claim does not rise or fall based on that alleged
does not follow. Failing to affirmatively demonstrate the correspondence. Rather, the salient allegations are those
alleged fraudulent enterprise does not establish the absence of discussed above concerning Bosch’s role in programming the
a fraudulent enterprise. EDC17, the device at the heart of the fraudulent enterprise.
See Duramax, 298 F. Supp. 3d at 1087. 3
Bosch criticizes Plaintiffs for failing to identify documentary
evidence demonstrating Bosch’s participation in the RICO 3 Bosch also argues briefly that Plaintiffs fail to plead
enterprise after receiving tens of thousands of documents
the existence of a RICO conspiracy because they fail to
from Defendants. Bosch overlooks the procedural posture of
plead intent or a substantive RICO violation. Because the
this case. Plaintiffs are under no obligation at the pleading Court disagrees with Bosch’s conclusions on those two
stage to identify documentary evidence substantiating their points (as discussed above), the Court also disagrees with
claims. The fact that they attempted to do so, successfully Bosch’s conclusion as to the RICO conspiracy.
or not, is not fatal to their claims, nor does their attempt
*11 Before addressing the remaining arguments advanced
to do so create an obligation that did not otherwise exist.
by the motion to dismiss, it is worth emphasizing a point
Bosch contends that “at this stage of the case, Plaintiffs can no
made by Bosch in opposing their joinder and now criticizing
longer claim that ‘the relevant facts lie exclusively within the
Plaintiffs' information and belief pleading. Rule 8(a) and, in
knowledge and control of’ GM and Bosch LLC.” Mot. at 32.
this circumstance, rule 9(b) are not the only rules governing
The implication is that Plaintiffs should face a higher pleading
the pleadings. Pursuant to Federal Rule of Civil Procedure
burden at this stage because they have had the benefit of
11(b), by presenting a pleading to the Court Plaintiffs are
discovery before filing an amended complaint. Neither Rule
certifying that to the best of their “knowledge, information,
8(a) nor 9(b) makes such a distinction.
and belief, formed after an inquiry reasonable under the
circumstances ...the factual contentions have evidentiary
Moreover, this documentary evidence is not properly before
support.” (emphasis added). Of course, the rule applies
the Court’s consideration on a 12(b)(6) motion. 2 A court with equal force to “the denial of factual contentions.”
generally cannot look beyond the face of the Plaintiff’s Fed. R. Civ. P. 11(b)(4). Because Plaintiffs have the benefit
complaint when adjudicating a motion to dismiss for failure of substantial discovery that was previously only available
to state a claim unless the court converts the motion into to General Motors, their duty of inquiry extends to that
a motion for summary judgment after proper notice is discovery. It is reasonable to expect a thorough review of the
given to the parties. However, a district court can consider discovery furnished thus far and that the amended complaint
such documents without converting the motion into one for reflects a candid appraisal of the evidentiary basis for the
summary judgment where two conditions are met: 1) the allegations. To the extent Plaintiffs are being cavalier with
documents are referred to in the complaint, and 2) are central their “information and belief” pleading solely to survive the
to the claims contained therein. Gavitt v. Born, 835 F.3d 623, 12(b)(6) motion, they risk sanctions. See Fed. R. Civ. P. 11(c).
640 (6th Cir. 2016).

2 If the current evidentiary record affirmatively disproves

D.
the Plaintiffs' claims, as Bosch contends, Bosch
presumably would not hesitate to move for summary Bosch argues that Plaintiffs fail to allege that their injuries
judgment.
were “by reason of” a RICO violation. Mot. at 10 (quoting 19
Here, the documents are referred to in the complaint. U.S.C. 1964(c) ). The RICO proximate causation analysis is
However, Bosch offers no explanation as to how “an email closely related to (even subsumed in) the statutory standing
chain in which a GM employee circulated an innocuous analysis. The Supreme Court has “held that a plaintiff’s right
meeting agenda among GM and Bosch engineers” is central to sue ... required a showing that the defendant’s violation
to Plaintiffs' claim. In fact, Bosch’s characterization of the not only was a ‘but for’ cause of his injury but, was the

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Case 2:19-cv-13429-PDB-DRG
Counts ECFin No.
v. General Motors, LLC, Not Reported Fed. 84-6 filed
Supp. (2018) 08/03/20 PageID.3166 Page 16 of 55
RICO Bus.Disp.Guide 13,093

proximate cause as well.” Holmes, 503 U.S. at 268, 112 S.Ct. of the EDC17 was a substantial and foreseeable cause of their
1311. The plaintiff must show “some direct relation between injury.
the injury asserted and the injurious conduct alleged.” Id.
Importantly, the causation inquiry must focus on the alleged Bosch argues as follows in its motion to dismiss:
link between the “predicate acts” and the asserted injury.
Plaintiffs must show that each defendant’s wrongful conduct This Court in Duramax sustained plaintiffs' RICO claim
was a “substantial and foreseeable cause of the injury and the on the understanding that it was “not primarily premised
relationship between the wrongful conduct and the injury is on proof of violation of EPA regulations” and that
logical and not speculative.” In re ClassicStar Mare Lease “alleg[ations] that the [defendants] intended to deceive
Litig., 727 F.3d 473, 487 (6th Cir. 2013) (quotations omitted). regulators” were not essential to the plaintiffs' RICO claim.
See 298 F. Supp. 3d at 1088. That premise is not viable
In Duramax, this Court held as follows: here, and for that reason the RICO claims here fail.
The Complaint makes clear that the allegations regarding
EPA and CARB are central to the claim and that the
EPA and CARB are the “direct victims.” See Compl. ¶¶
Plaintiffs have plausibly alleged that
160-61. (“[I]n order to obtain the COCs necessary to
Bosch’s joint activities with GM
sell their vehicles, GM did not disclose, and affirmatively
were a substantial factor contributing
concealed from government regulators, the presence of
to their injury. EDC17 is the
the test-detecting and performance-altering software code
means by which Plaintiffs were
that it developed with Bosch.... Because the COCs were
injured. According to Plaintiffs, Bosch
fraudulently obtained ... the [Subject] Vehicles were
‘exerts near-total control’ over the
never covered by a valid COC, and thus were never
customization of EDC17, eliminating
legal for sale.”) (emphasis added), 163 (“GM hid ... facts
the possibility that GM programmed
from the EPA, CARB and other state regulators, and
the functionality which enables use
consumers, and it continued to sell and lease the [Subject]
of defeat devices without Bosch’s
Vehicles despite their illegality and with the complicity of
knowledge. See Con. Am. Compl.
Bosch”), 242 (The alleged enterprise’s “direct purpose was
at 94–95. Plaintiffs thus plausibly
to deceive the regulators and the public”)
allege that Bosch developed the
vehicle component which has caused *12 Mot. at 10-11. As Bosch acknowledged, this Court
Plaintiffs' injury, that Bosch was concluded in Duramax that the plaintiffs' RICO claim was
aware of the deception that component not premised on proof of violation of EPA regulations. Bosch
would inevitably contribute to, and contends that “this premise is not viable here,” however, due
that Bosch was aware that consumers to certain allegations in Plaintiffs' complaint that supposedly
would pay a premium for vehicle demonstrate that the EPA and CARB, and not Plaintiffs, were
capabilities that the component would the “direct victims” of any alleged RICO activity. Yet these
not deliver. identical allegations were also present in the complaint at
issue in Duramax. Compl. ¶¶ 164-165, ECF No. 18 (Case No.
17-cv-11661). For the same reasons identified in Duramax,
Duramax, 298 F. Supp. 3d at 1076. Similarly, Plaintiffs Plaintiffs' RICO claim in this case is not dependent on proof
in this case allege that Bosch “actively participated in the of a violation of EPA regulations.
development of the defeat device.” Compl. ¶ 165, ECF No.
94. Specifically, Plaintiffs allege that the EDC17 “controls Bosch’s argument here is also somewhat out of place. The
every parameter that is important for effective, low-emission argument centers around alleged regulatory violations and
combustion.” Id. ¶ 167. Plaintiffs further allege that the their importance to sustaining Plaintiffs' RICO claims. Yet
EDC17 is equipped with a defeat device, that Bosch “exerts Bosch raises this discussion in section A of its brief, which
near-total control” over the EDC17, and that the EDC17 purports to address causation. It is unclear how the two
is designed “to prevent customers, like GM, from making topics relate. In Duramax, the Court determined that the
significant changes on their own.” Compl. ¶¶ 147, 248. Plaintiffs' RICO claims were not dependent on proof of a
Plaintiffs have sufficiently alleged that Bosch’s programming regulatory violation. The Court made this determination in

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Case 2:19-cv-13429-PDB-DRG
Counts ECFin No.
v. General Motors, LLC, Not Reported Fed. 84-6 filed
Supp. (2018) 08/03/20 PageID.3167 Page 17 of 55
RICO Bus.Disp.Guide 13,093

to consumers. Admittedly, Plaintiffs

response to the defendants' argument that the EPA’s extensive
also allege that the RICO Defendants
regulatory scheme provided the exclusive remedy to redress
intended to deceive regulators and
violations of the CAA, thereby precluding plaintiffs' RICO
made fraudulent mail and wire
claim. The Court found that argument to be without merit, and
communications to regulators. But
to be largely coterminous with the defendants' argument that
neither of those allegations are
plaintiffs' state law claims are preempted by the CAA. The
essential to Plaintiffs' RICO claim.
discussion in that opinion had nothing to do with causation.
Accordingly, they are best construed
as collateral matters that are
Bosch now advances the same argument by raising it in
only peripherally related to the
the context of the causation requirement. Bosch suggests
regulatory concerns advanced by EPA
that Plaintiffs' allegations concerning fraud on the EPA and
regulations.
CARB somehow undermine the causal relationship between
the RICO violation and Plaintiffs' injury. According to Bosch,
those allegations demonstrate that the EPA and CARB are
the “direct victims” of Bosch’s conduct. Even if the EPA and In re Duramax Diesel Litig., 298 F. Supp. 3d 1037,
CARB are direct victims, the conclusion Bosch reaches does 1088 (E.D. Mich. 2018). In other words, the allegations
not follow. There is no reason why Bosch’s conduct cannot concerning regulatory violations are collateral allegations
have multiple “direct victims,” including EPA, CARB, and which are unnecessary to sustain Plaintiffs' RICO claim.
the Plaintiffs. Bosch’s discussion is non-responsive to the Bosch concludes that this is somehow fatal to Plaintiffs' RICO
allegations in the Complaint concerning the injuries sustained claim. This conclusion does not follow logically. When faced
by Plaintiffs, not the EPA or CARB, and the causal connection with a motion to dismiss under rule 12(b)(6), the Court is to
between those injuries and the RICO violation. consider whether the Plaintiffs have pled sufficient facts to
sustain their claim, not whether they have pled more facts than
As explained in Duramax, necessary.

Plaintiffs' RICO claim is not primarily III.

premised on proof of violation of EPA
regulations and thus is cognizable. The *13 Accordingly, it is ORDERED that the motion to
alleged common purpose at the heart dismiss, ECF No. 108, is DENIED.
of the RICO scheme is the deception
of consumers. The alleged injury
All Citations
is overpayment by consumers. The
identified predicate acts of mail and Not Reported in Fed. Supp., 2018 WL 5264194, RICO
wire fraud involve communications Bus.Disp.Guide 13,093

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

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Attachment 3
Casev.2:19-cv-13429-PDB-DRG
Davis ECF
U.S., Not Reported in F.Supp.2d (2010) No. 84-6 filed 08/03/20 PageID.3169 Page 19 of 55
2010 WL 5014533

go well. Davis sustained serious injuries to his left eye. On

September 19, 2008, Davis filed a lawsuit against the United
2010 WL 5014533
States, alleging that the negligence of his treating physicians
Only the Westlaw citation is currently available.
—Drs. Tod Diffenbaugh and Russell Fry—as well as the
United States District Court, E.D. Kentucky,
negligence of Big Sandy medical staff caused his injuries.
Southern Division, at Pikeville.
R. 1. The United States filed a motion for partial summary
Johnny DAVIS, Plaintiff, judgment on July 22, 2009, arguing that it could not be
v. held liable for the negligence of Drs. Diffenbaugh and Fry
UNITED STATES of America, Defendant. under the Federal Tort Claims Act because the doctors were
independent contractors. R. 26. In support of that motion,
Civil No. 08–184–ART. the United States submitted an affidavit from Sherry Slone,
| the Health Services Administrator at Big Sandy, and records
Dec. 3, 2010. showing payments that the prison had made to the doctors.
Slone stated that both Fry and Diffenbaugh were independent
Attorneys and Law Firms contractors. Based on Slone's declaration, Magistrate Judge
Edward Atkins recommended that the Court grant the United
Johnny Davis, Coleman, FL, pro se.
States' motion for partial summary judgment. R. 33. Davis
Dell W. Littrell, U.S. Attorney's Office, Lexington, KY, for did not object to Judge Atkins's Report and Recommendation,
Defendant. and the Court adopted it on October 20, 2009. R. 35.

The United States filed a second motion for summary

judgment on January 11, 2010. R. 45. In this motion, the
MEMORANDUM OPINION & ORDER
United States argued that Davis had failed to provide expert
AMUL R. THAPAR, District Judge. testimony establishing that the actions of Big Sandy medical
staff caused his injuries, as required by Kentucky law. On June
*1 The plaintiff, Johnny Davis, failed to provide expert 25, 2010, Judge Atkins filed a Report and Recommendation in
testimony establishing that prison employees caused his which he recommended that the Court grant the United States'
injuries. Because Kentucky law requires expert testimony motion for summary judgment. R. 50. The Court adopted
to prove causation in medical negligence cases, the Court Judge Atkins's recommended disposition, granted the United
granted the United States' motion for summary judgment. R. States' motion for summary judgment, R. 53, and entered
53. Now Davis has come forward with the very evidence Judgment in favor of the United States on August 20, 2010.
that he was lacking before. Granting him the slack that R. 54.
he is due as a pro se plaintiff, see Loubser v. Thacker,
440 F.3d 439, 443 (7th Cir.2006), Davis has provided Twenty-one days later, Davis filed a motion to alter or amend
newly discovered evidence that justifies vacating the Court's the Court's Judgment under Rule 59(e) of the Federal Rules of
Judgment. Therefore, the Court will grant Davis's motion to Civil Procedure. R. 55. In that motion, Davis asks the Court
alter or amend the Court's Judgment under Rule 59(e) of the to set aside both Orders granting summary judgment in favor
Federal Rules of Civil Procedure. R. 55. of the United States—the Order entered on October 20, 2009,
granting the United States partial summary judgment because
Drs. Fry and Diffenbaugh were independent contractors,
and the Order entered on August 20, 2010, granting the
BACKGROUND
United States summary judgment because of Davis's failure
This case has been around for a while. And because of this to provide expert testimony. Davis attached an affidavit from
Order, it will be around for a while longer. What follows is a Dr. Diffenbaugh to his Rule 59(e) motion. R. 55, Attach. 2.
brief summary of the relevant procedural history. Three days later, Davis filed a motion to amend his motion
to include a declaration from Dr. Diffenbaugh, R. 56, which
Johnny Davis had cataract surgery on June 27, 2005, while he the Court granted, R. 57. A month later, Davis filed another
was incarcerated at the United States Penitentiary, Big Sandy motion to amend his Rule 59(e) motion, this time to add a
(“USP Big Sandy”). The surgery and his recovery did not declaration that he received from Dr. Fry. R. 60. That motion

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Casev.2:19-cv-13429-PDB-DRG
Davis ECF
U.S., Not Reported in F.Supp.2d (2010) No. 84-6 filed 08/03/20 PageID.3170 Page 20 of 55
2010 WL 5014533

is still pending. Davis purportedly did not receive either Dr. file any objections, and therefore the Court adopted Judge
Diffenbaugh's or Dr. Fry's declarations in time to submit them Atkins's Report and Recommendation as the opinion of the
with his original motion. Court. R. 35. Davis's current objection—which is essentially
an attempt to reinterpret evidence that was already before the
Court—is almost a year too late.

DISCUSSION
Next, Davis argues that two pieces of newly discovered
*2 A court may alter or amend its judgment under Rule evidence necessitate setting aside the Court's determination
59(e) based on: “(1) a clear error of law; (2) newly discovered that Drs. Fry and Diffenbaugh were independent contractors.
evidence; (3) an intervening change in controlling law; or First, Davis has submitted a declaration from himself. In
(4) a need to prevent manifest injustice.” Leisure Caviar, that declaration, Davis states that he spoke with Mr. J.
LLC v. U.S. Fish & Wildlife Serv., 616 F.3d 612, 615 Smith, a contract specialist at USP Big Sandy, who informed
(6th Cir.2010). Davis invokes the second ground—newly him that Dr. Diffenbaugh “was an employee at USP Big
discovered evidence—in an attempt to set aside the Court's Sandy at one time years ago” and that Dr. Fry “was not
Judgment. Davis attacks both (1) the Court's grant of partial under contract during ... 2005.” R. 55, Attach. 3. Assuming,
summary judgment to the United States on the ground that without deciding, that Davis's declaration constitutes newly
Drs. Fry and Diffenbaugh were independent contractors, and discovered evidence, it is inadmissible because it is hearsay.
(2) the Court's grant of summary judgment to the United Fed.R.Evid. 802. And a party cannot use hearsay to create
States because Davis failed to provide expert testimony. For a genuine issue of material fact in order to defeat summary
the following reasons, the Court will deny Davis's Rule 59(e) judgment. See North Am. Speciality Ins. Co. v. Myers, 111
motion as to the first ground and grant it as to the second. F.3d 1273, 1283 (6th Cir.1997).

*3 The second piece of newly discovered evidence that

I. Independent Contractors Davis has submitted is an affidavit from Dr. Diffenbaugh.
Davis first asks the Court to vacate its Order granting partial At the end of the typewritten affidavit, Dr. Diffenbaugh
summary judgment to the United States on the ground that apparently hand wrote the following note: “Amend: ... (2)
Drs. Fry and Diffenbaugh were independent contractors. I was not contracted at the time; the job was filled by
Davis makes several arguments. First, he argues that the me until it was to be placed up for bid by contractors.”
United States did not submit sufficient evidence establishing R. 55, Attach. 2. Although, for the reasons explained in
that Drs. Fry and Diffenbaugh were independent contractors. the next section, Dr. Diffenbaugh's affidavit does qualify as
The United States submitted a declaration from Sherry Slone, newly discovered evidence, this single handwritten notation
the Big Sandy Health Services Administrator, who stated that —submitted almost a year after the Court granted partial
the doctors were not Big Sandy employees but rather were summary judgment to the United States—is not sufficient to
independent contractors. The United States also submitted reopen the Court's determination that Dr. Diffenbaugh was an
copies of purchase orders and health insurance claims forms independent contractor. Dr. Diffenbaugh did not say that Big
showing the amounts that the BOP paid to Drs. Fry and Sandy actually employed him, nor did he specifically claim
Diffenbaugh for the services they performed. But Davis that he was not an independent contractor.
argues that the evidence was not sufficient because the United
States never submitted actual contracts that were signed But Dr. Diffenbaugh's notation, while not enough to reopen
by Drs. Fry and Diffenbaugh establishing an independent the case on this issue at this time, does present at least the
contractor relationship. This argument fails because it is glimmer of the possibility that Dr. Diffenbaugh was not an
simply far too late. Davis should have made this argument as independent contractor. The Court based its previous grant of
an objection to the Report and Recommendation that Judge summary judgment on the United States' representation and
Atkins filed on September 30, 2009. R. 33. Rule 72 of the supporting evidence that Dr. Diffenbaugh was an independent
Federal Rules of Civil Procedure required Davis to file any contractor. If previously unavailable evidence exists that calls
objections to Judge Atkins's Report and Recommendation into question the United States' representation, Davis should
within ten days of receiving a copy, and Judge Atkins be permitted to present that evidence to the Court. The Court
specifically advised Davis that failure to object would result will then decide whether the evidence justifies reopening the
in waiver of any further appeal. R. 33 at 4. Davis did not issue of Dr. Diffenbaugh's status as an independent contractor.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 2

Casev.2:19-cv-13429-PDB-DRG
Davis ECF
U.S., Not Reported in F.Supp.2d (2010) No. 84-6 filed 08/03/20 PageID.3171 Page 21 of 55
2010 WL 5014533

To this end, the Court will assist Davis in locating a lawyer which a medical expert is required, the plaintiff must produce
who may be willing to take his case on a contingency fee expert evidence or summary judgment is proper.”). But now
basis or on some other agreement between him and his lawyer. Davis has provided the very expert testimony that Kentucky
If, after consulting with Davis and reviewing the relevant law requires and that he was missing before. The declarations
evidence, the lawyer determines that there is a case to be from Drs. Fry and Diffenbaugh both state that medical staff at
made that Dr. Diffenbaugh was not an independent contractor Big Sandy aggravated Davis's injury by delaying his medical
and can present newly discovered evidence establishing that treatment. R. 55, Attach. 9; R. 60, Attach. 1. If Davis had
fact, the Court will entertain a new motion to set aside the provided these declarations before, he would have survived
Judgement on that ground. the United States' motion for summary judgment.

Finally, Davis argues that the United States perpetrated fraud The question, however, is whether the doctors' declarations
on the Court by submitting Sherry Slone's declaration stating are properly before the Court now. The Court can only
that Drs. Fry and Diffenbaugh were independent contractors. grant Davis's Rule 59(e) motion and vacate its Judgment if
Davis claims that Slone's declaration was false, and that the the declarations are “newly discovered evidence.” Leisure
United States knew it was false. But the only competent Caviar, 616 F.3d at 615. “To constitute ‘newly discovered
evidence that Davis submits in support of his fraud claim is evidence,’ the evidence must have been previously
Dr. Diffenbaugh's affidavit, which Davis claims shows that unavailable.” GenCorp, Inc. v. Am. Int'l Underwriters, 178
Dr. Diffenbaugh was not an independent contractor. For the F.3d 804, 834 (6th Cir.1999). “Evidence is ‘unavailable,’
reasons explained above, that lone piece of newly discovered so as to justify its late submission by way of a motion
evidence does not justify reopening Davis's case on the under Rule 59(e), only if it could not, in the exercise of
independent contractor issue at this time. And it certainly reasonable diligence, have been submitted before.” Javetz
does not demonstrate that the United States knowingly v. Bd. of Control, Grand Valley State Univ., 903 F.Supp.
submitted false evidence to the Court. Accordingly, the 1181, 1191 (W.D.Mich.1995). As Davis explains, he had
Court will deny Davis's Rule 59(e) motion to set aside the some difficulty locating Drs. Fry and Diffenbaugh. He is
Court's determination that Drs. Fry and Diffenbaugh were a prisoner, and his opportunities to conduct research and
independent contractors. correspond with the outside world are circumscribed. See
Moore v. Knight, 368 F.3d 936, 940 (7th Cir.2004) (“[A] due
diligence inquiry should take into account that prisoners are
II. Expert Testimony Establishing Causation limited by their physical confinement.”). For the same reason
*4 The Court granted the United States' second motion that the Court holds pleadings drafted by pro se parties to
for summary judgment on August 20, 2010, because Davis less stringent standards than pleadings drafted by lawyers, see
failed to provide expert testimony demonstrating that the Haines v. Kerner, 404 U.S. 519, 520–21 (1972), the Court
negligence of Big Sandy employees caused his injuries. R. will grant Davis some slack and assume that he could not
53. Davis brought his claims under the Federal Tort Claims have previously obtained the declarations from Drs. Fry and
Act (“FTCA”), which conditions the United States' liability Diffenbaugh through the exercise of reasonable diligence.
for the torts of its employees on the law of the state where the Therefore, the declarations are newly discovered evidence.
tort occurs. Because the alleged negligence took place at USP And they create a genuine issue of material fact as to whether
Big Sandy in Inez, Kentucky, the Court applied Kentucky law the negligence of Big Sandy medical staff caused Davis's
to Davis's claims. See Rayonier Inc. v. United States, 352 U.S. injuries. Accordingly, the Court will grant Davis's Rule 59(e)
315, 318 (1957). motion, vacate its grant of summary judgment to the United
States, and reopen the case.
Kentucky law requires a plaintiff in a medical negligence
case to provide expert testimony to establish causation. See
Andrew v. Begley, 203 S.W.3d 165, 170 (Ky.Ct.App.2006)
(“Except in limited factual circumstances ... the plaintiff CONCLUSION
in a medical negligence case is required to present expert
*5 For these reasons, it is ORDERED as follows:
testimony that establishes ... that the alleged negligence
proximately caused the injury.”). Davis's failure to provide
(1) Davis's motion to amend his Rule 59(e) motion, R. 60, is
expert testimony necessitated granting summary judgment to
GRANTED. The declaration of Dr. Russell Fry, which Davis
the United States. Id. (“[I]n a medical negligence case in

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Casev.2:19-cv-13429-PDB-DRG
Davis ECF
U.S., Not Reported in F.Supp.2d (2010) No. 84-6 filed 08/03/20 PageID.3172 Page 22 of 55
2010 WL 5014533

(5) This case shall be REINSTATED to the Court's active

tendered as an attachment to that motion, shall be entered into
docket.
the record.

(6) The Court will assist Davis in locating a lawyer who may
(2) Davis's motion for leave to file a reply memorandum in
be willing to represent him on a contingency fee basis or other
excess of fifteen pages, R. 64, is GRANTED.
basis that he may be willing to work out with this prospective
lawyer.
(3) Davis's motion to alter or amend the Court's Judgment
under Rule 59(e), R. 55, is GRANTED IN PART and
(7) If Davis is able to secure a lawyer, that lawyer shall file
DENIED IN PART. Davis's motion to set aside the Court's
a notice of appearance with the Court. After the lawyer files
grant of summary judgment to the United States on the ground
a notice of appearance, the Court will schedule a telephonic
that Drs. Fry and Diffenbaugh were independent contractors
status conference. If Davis is not able to secure a lawyer
is DENIED. Davis's motion to set aside the Court's grant
by January 31, 2011, the Court will set further dates and
of summary judgment to the United States on the ground
deadlines, including a trial date, at that time. The Clerk of the
that Davis failed to provide expert testimony, as required by
Kentucky law, is GRANTED. Court shall submit this matter to the undersigned for review
on January 31, 2011, if no lawyer has entered a notice of
appearance by that date.
(4) The Memorandum Opinion and Order, R. 53, and
the Judgment, R. 54, entered on August 20, 2010, are
VACATED. All Citations

Not Reported in F.Supp.2d, 2010 WL 5014533

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 4

Case 2:19-cv-13429-PDB-DRG ECF No. 84-6 filed 08/03/20 PageID.3173 Page 23 of 55

Attachment 4
Case
KBT 2:19-cv-13429-PDB-DRG
Group, LLC v. City of Eastpointe, SlipECF
CopyNo. 84-6
(2019) filed 08/03/20 PageID.3174 Page 24 of 55

parties' procedural rights, a detailed procedural history is

warranted.
2019 WL 1556194
Only the Westlaw citation is currently available.
United States District Court, E.D.
Michigan, Southern Division. PROCEDURAL HISTORY

KBT GROUP, LLC, et al., Plaintiffs, On February 2, 2018, Plaintiff, H&J Solutions, brought this
v. action against the City of Eastpointe. [Dkt. #1.]. On March 19,
CITY OF EASTPOINTE, Defendant. 2018, Defendant filed an Answer [6] stating that it “lack[ed]
knowledge or information sufficient to form a belief as to the
Case No. 18-10409 truth of the matter asserted” in regard to Plaintiff’s assertion
| that jurisdiction by this Court is proper (¶¶ 44-48), and in
Signed 04/10/2019 regard to the portion of the complaint that described the
injuries H&J suffered as a result of the City’s actions (¶¶
Attorneys and Law Firms
37-40).
Mark K. Wasvary, Becker and Wasvary, Troy, MI, Aaron D.
On September 21, 2018, after some discovery, Plaintiff
Cox, Law Offices of Aaron D. Cox PLLC, Taylor, MI, for
moved to substitute-in KBT as Plaintiff. It noted that both
Plaintiffs.
H&J and KBT are controlled by the same people, and
Lawrence Opalewski, Dalton & Tomich PLC, Detroit, that it was KBT, not H&J, who had “title to the property
MI, Timothy S. Ferrand, Cummings, McClorey, Clinton at issue prior to the invoice being issued for the City’s
Township, MI, for Defendant. unlawful fees.” (Dkt. 15, pg. 5). Defendant filed a response
to that Motion on October 5, 2018 stating that “The City
of Eastpointe does not object to the substitution,” but also
ORDER OVERRULING DEFENDANT'S reserving “additional defenses created by the substitution
OBJECTION [43] TO THE ORDER GRANTING created by the transfer of a property interest [sic] during the
PLAINTIFF'S MOTION TO SUBSTITUTE pendency of this litigation.” Among these defenses was that
PARTY [42] AND DENYING AS MOOT KBT does not have standing, because it did not participate
DEFENDANT'S MOTION TO DISMISS [35] in the Dangerous Buildings hearing. On October 29, 2018,
AND PLAINTIFF'S MOTION TO STAY [37] Plaintiff filed an Amended Motion to Amend [23], clarifying
that H&J was the manager of KBT and that the property was
Arthur J. Tarnow, Senior United States District Judge transferred on February 10, 2017 for liability purposes and in
order to put title in a Michigan company.
*1 Plaintiff brings this suit against the City of Eastpointe
for taking what it alleges are illegal and unconstitutional On February 15, 2019, after another three months of
regulatory actions against its property at 23155 Beechwood, discovery, Defendant filed a Motion to Dismiss Due to Lack
after the City deemed it a “dangerous property.” Plaintiff of Standing [35]. It argued that H&J Solutions lacked standing
brings the suit as a putative class action and challenges both to bring this suit because KBT, not H&J, sustained the alleged
the means by which the “dangerous property” designation is injuries giving rise to the suit. On February 21, 2019, Plaintiff
assigned and the City’s actions in furtherance of its scheme. filed a Motion to Stay [37] Defendant’s Motion to Dismiss
[35] pending the outcome of its motions for Leave to File an
There has been some confusion about which owner of Amended Complaint [15, 23]. Defendant filed a Response to
23155 Beechwood is the proper Plaintiff to bring this suit. the Motion to Stay [38] on February 27, 2019. On March 14,
The Magistrate Judge granted Plaintiff’s Motion to Amend 2019, the Magistrate Judge granted Plaintiff’s First Motion
its Complaint to address this matter on March 14, 2019. to Substitute Party [15]. The Magistrate Judge noted that
Defendant objected on the grounds that the Court lacks Defendant did not object to the substitution in its response and
subject matter jurisdiction to hear this case, and that Objection ordered Plaintiff to file an amended complaint within 10 days.
is now before the Court. Because this matter concerns the The Amended Complaint [44] was filed on March 19, 2019.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 1

Case
KBT 2:19-cv-13429-PDB-DRG
Group, LLC v. City of Eastpointe, SlipECF
CopyNo. 84-6
(2019) filed 08/03/20 PageID.3175 Page 25 of 55

*2 Defendant objected to this Order on March 18, 2019. Though Defendant does not cite this standard, it argues that
It argued that the Court’s lack of subject matter jurisdiction the Magistrate Judge erred when she granted a motion to
cannot be waived, and that the Magistrate Judge’s Order is a amend a complaint despite Defendant’s pending motion to
“nullity,” because the Court never had jurisdiction. dismiss on subject matter grounds. Though there may be times
when granting leave to amend may be inappropriate when it
moots a pending motion to dismiss, this is not one of them.

STANDARD OF REVIEW
Defendant is of course correct that defects in subject matter
Objections to orders on non-dispositive matters by Magistrate jurisdiction cannot be waived and mandate dismissal even
Judges are heard under FED. R. CIV. P. 72(a). when not raised until the Supreme Court. See Louisville
& Nashville Railroad Co. v. Mottley, 211 U.S. 149, 29
S.Ct. 42, 53 L.Ed. 126 (1908). In this case though, the
(a) Nondispositive Matters. When a Court never found that it lacked jurisdiction, because it
pretrial matter not dispositive of a never adjudicated Defendant’s Motion to Dismiss. Far from
party's claim or defense is referred Defendant’s assertion that “Plaintiff is a complete stranger to
to a magistrate judge to hear this case,” it seems that H&J and KBT are closely related,
and decide, the magistrate judge and that the standing question would be resolved in the
must promptly conduct the required normal course of things, after briefing by the parties and a
proceedings and, when appropriate, hearing. This was never necessary, of course, because the
issue a written order stating the Magistrate Judge decided the outstanding motion to amend
decision. A party may serve and before briefing was even completed on the motion to dismiss.
file objections to the order within
14 days after being served with There is no rule that courts must prioritize adjudicating
a copy. A party may not assign Rule 12(b)(1) motions to dismiss over earlier-filed procedural
as error a defect in the order not motions that may moot those motions. Indeed, the Sixth
timely objected to. The district Circuit has noted that the Federal Rules of Civil Procedure
judge in the case must consider “evince[ ] a liberal amendment policy,” by providing that the
timely objections and modify or set district court “should freely give leave [to amend a complaint]
aside any part of the order that is when justice so requires.” Alexander v. Eagle Mfg. Co., LLC,
clearly erroneous or is contrary to 714 Fed.Appx 504 (6th Cir. 2017) (quoting FED. R. CIV. P.
law. 15(a)(2) ). The analysis of what justice required in this case
might be different if a plaintiff filed a motion to amend in
order to escape a motion to dismiss, after the defendant had
already devoted significant resources to the motion. In this
FED. R. CIV. P. 72(a).
case it is the opposite, however. Plaintiff filed a motion to
amend; Defendant didn't object; and then Defendant turned
For this reason, “[r]eview under Rule 72(a) provides
the basis of that motion into its own motion to dismiss. The
“considerable deference to the determinations of
equities weighed towards granting leave to amend, and the
magistrates.” In re Search Warrants Issued Aug. 29, 1994, 889
Magistrate Judge’s Decision to do so, despite the pending
F.Supp. 296, 298 (S.D. Ohio 1995). Indeed, “Clear error will
motion to dismiss, was not erroneous.
lie only when the reviewing court is left with the definite, firm
conviction that a mistake has been made.” Mitan v. Fed. Home
*3 Plaintiff’s March 19, 2019 Amended Complaint now
Loan Mortg. Corp., 2013 U.S. Dist. LEXIS 156696 *8, 2013
supersedes its original complaint. See Phifer v. City of Grand
WL 5913660 *3 (E.D. Mich. Nov. 1, 2013) (quoting Isabel v.
Rapids, 657 F.Supp.2d 867, 876 (W.D. Mich. 2009) (“When
City of Memphis, 404 F.3d 404, 411 (6th Cir. 2005) ).
a plaintiff files an amended complaint, the new complaint
supersedes all previous complaints and controls the case
from that point forward.”); see also Charles Alan Wright,
ANALYSIS Arthur R. Miller & Mary Kay Kane, Federal Practice &
Procedure § 1476, pp. 556-57 (2nd ed. 1990) (“It is well-

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 2

Case
KBT 2:19-cv-13429-PDB-DRG
Group, LLC v. City of Eastpointe, SlipECF
CopyNo. 84-6
(2019) filed 08/03/20 PageID.3176 Page 26 of 55

established that an amended complaint supersedes an original

IT IS FURTHER ORDERED that Defendant’s Motion to
complaint and renders the original complaint without legal
Dismiss [35] is DENIED AS MOOT.
effect.”). Defendant’s Motion to Dismiss [35] is therefore
moot, and will be denied without prejudice. See, e.g., Siefman
IT IS FURTHER ORDERED that Plaintiff’s Motion to Stay
v. Wolverine Technologies, Inc., 1988 WL 212474, at *2, 1988
[37] is DENIED AS MOOT.
U.S. Dist. LEXIS 17437, *5 (E.D. Mich. Sept. 27, 1988)
(“The filing of an amended complaint mooted any motions to
SO ORDERED.
dismiss directed toward the original complaint.”).

All Citations
Accordingly,
IT IS ORDERED that Defendant’s Objection [43] to the Slip Copy, 2019 WL 1556194
Order on Motion to Substitute Party [42] is OVERRULED.

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 3

Case 2:19-cv-13429-PDB-DRG ECF No. 84-6 filed 08/03/20 PageID.3177 Page 27 of 55

Attachment 5
Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3178 Page 28 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

Plaintiff worked for Vaive from October 2015 until August

2016. ECF 17, PgID 326, 330. Plaintiff alleged that her
2019 WL 117337
coworkers subjected her to multiple incidents of harassing
United States District Court, E.D.
conduct beginning in February 2016. Id. at 327–30 (order
Michigan, Southern Division.
on Vaive's motion for summary judgment detailing Plaintiff's
Crystal MURPHY, Plaintiff, allegations). In August 2016, Vaive terminated Plaintiff's
v. employment. Id. at 330.
VAIVE WOOD PRODUCTS CO., Defendant.
Plaintiff sued and alleged that Vaive (1) tolerated and
Case No. 2:17-cv-11513 promoted a hostile work environment of severe and pervasive
| sexual harassment and (2) terminated her employment for
Signed 01/07/2019 complaining about sexual harassment in the workplace. See
ECF 1. After discovery closed, Vaive filed a motion for
Attorneys and Law Firms summary judgment. ECF 13. On April 17, 2018, the Court
held a hearing on the motion.
David A. Hardesty, Maia Johnson Braun, Caitlin E. Malhiot,
Gold Star Law, PC, Troy, MI, for Plaintiff.
The Court granted Vaive's motion for summary judgment on
Brian M. Akkashian, Paesano Akkashian, PC, Bloomfield Plaintiff's retaliatory-termination claim but denied summary
Hills, MI, Devin W. Bone, Warner Norcross + Judd LLP, judgment on Plaintiff's hostile-work-environment claim. See
Southfield, MI, for Defendant. ECF 17. In particular, the Court found that there was a genuine
dispute of material fact regarding whether Plaintiff satisfied
the second element of the prima facie case of a hostile-work-
environment claim. Id. at 332. The Court noted the “paucity
OPINION AND ORDER DENYING DEFENDANT'S
of verified facts besides [various] deposition testimony” and
MOTION FOR JUDGMENT NOTWITHSTANDING
the “inconsistency and scarcity” of Plaintiff's allegations. Id.
THE VERDICT [35], DENYING DEFENDANT'S
at 333. The Court refrained, however, from weighing the
MOTION FOR A NEW TRIAL [36], AND
evidence or making credibility determinations. Id.
GRANTING IN PART AND DENYING
IN PART DEFENDANT'S MOTION TO
Trial in the case commenced on July 18, 2018 and concluded
ALTER OR AMEND THE JUDGMENT [37]
the following day. Plaintiff testified on own her behalf, and
STEPHEN J. MURPHY, III, United States District Judge Vaive called several witnesses. After deliberating, the jury
delivered a verdict in favor of Plaintiff and awarded her
*1 On July 19, 2018, a jury entered a verdict in favor $10,000 in damages for emotional distress. ECF 31, PgID
of Plaintiff Crystal Murphy. ECF 31. The Court entered 433–36.
judgment. ECF 33. On August 16, 2018, Defendant Vaive
Wood Products Co. (“Vaive”) filed three post-judgment
motions: (1) a motion for judgment notwithstanding the
STANDARD OF REVIEW
verdict, ECF 35; (2) a motion for a new trial, ECF 36; and (3)
a motion to alter or amend the judgment, ECF 37. The Court I. Motion for Judgment Notwithstanding the Verdict
has reviewed the briefs and finds that a hearing is unnecessary. A federal court resolves a motion for judgment
For the reasons below, the Court will deny Vaive's motions notwithstanding the verdict under Rule 50(b) pursuant to the
for judgment notwithstanding the verdict and for new trial Rule 56 standard. White v. Burlington N. & Santa Fe Ry.
and will grant in part Vaive's motion to alter or amend the Co., 364 F.3d 789, 794 (6th Cir. 2004) (citation omitted).
judgment. A jury verdict is affirmed unless there was no legally
sufficient evidentiary basis for a reasonable jury to find for the
prevailing party. See Fed. R. Civ. P. 50(a). 1 Courts review the
BACKGROUND evidence “in the light most favorable to the nonmoving party
and determine whether there was a genuine issue of material
fact for the jury.” White, 364 F.3d at 794 (quoting Gray v.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 1

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3179 Page 29 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

Toshiba Am. Consumer Prods., Inc., 263 F.3d 595, 598 (6th 14-CV-10942, 2015 WL 1757225, at *1 (E.D. Mich. Apr. 17,
Cir. 2001) ). Courts thus “draw all reasonable inferences in 2015) (quoting Kenneth Henes Special Projects Procurement
favor of the prevailing party” and “do not make any credibility v. Cont'l Biomass Indus., Inc., 86 F. Supp. 2d 721, 726 (E.D.
determinations or weigh the evidence.” Id. (citing Reeves v. Mich. 2000) ).
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) ).

II. Motion for a New Trial DISCUSSION

*2 On motion of a party, a federal court may grant a new
I. Motion for Judgment Notwithstanding the Verdict
trial for any reason for which a federal court has previously
Vaive argues that a reasonable jury could not have found for
granted a new trial. Fed. R. Civ. P. 59(a)(1)(A). A new trial
Plaintiff because Plaintiff failed to establish multiple elements
may be granted if “the jury reaches a ‘seriously erroneous
of her hostile-work-environment claim and failed to rebut
result as evidenced by (1) the verdict being against the clear
Vaive's affirmative defenses.
weight of evidence; (2) the damages being excessive; or (3)
the trial being unfair to the moving party in some fashion,
i.e., the proceedings being influenced by prejudice or bias.’ ” A. Plaintiff's Claim
Cummins v. BIC USA, Inc., 727 F.3d 506, 509 (6th Cir. 2013) To satisfy her burden of proof, Plaintiff had to prove the
(quoting Static Control Components, Inc. v. Lexmark Int'l, elements of her claim by a preponderance of the evidence,
Inc., 697 F.3d 387, 414 (6th Cir. 2012) ). which means “that it [was] more likely than not that a
proposition [was] true.” ECF 29, PgID 421 (jointly-filed
A verdict is against the clear weight of evidence only if jury instructions); see also id. at 422 (listing elements of
the verdict was unreasonable. See Barnes v. Owens-Corning, her claim). Vaive contends that Plaintiff failed to show
Fiberglas Corp., 201 F.3d 815, 820–21 (6th Cir. 2000) that she was subjected to unwelcome sexual harassment,
(citation omitted). “[I]f a reasonable juror could reach the failed to show that the harassment altered her conditions of
challenged verdict, a new trial is improper.” Id. at 821. To employment, and failed to provide evidence to establish that
make the determination, a court “must compare the opposing Vaive's managerial personnel knew of the harassment but did
proofs, weigh the evidence, and set aside the verdict only if not respond adequately. ECF 35, PgID 457 (citing Fenton v.
it determines that the verdict is against the clear weight of HiSAN, Inc., 174 F.3d 827, 829–30 (6th Cir. 1999) (listing
the evidence.” United States v. L.E. Cooke Co., 991 F.2d 336, elements of hostile work environment prima facie case) ).
343 (6th Cir. 1993) (citing Woodbridge v. Dahlberg, 954 F.2d
1231, 1234 (6th Cir. 1992) ).

1. Unwelcome Harassment.
III. Motion to Alter or Amend Judgment
Vaive argues that Plaintiff introduced only her own testimony
A federal court may grant a Rule 59(e) motion to alter or
regarding the sexual harassment and that the testimony
amend a judgment if there was: “(1) a clear error of law;
was “vague, contradictory, and at times entirely untruthful.”
(2) newly discovered evidence; (3) an intervening change in
controlling law; or (4) a need to prevent manifest injustice.” ECF 35, PgID 457. 2 Vaive directs the Court to Plaintiff's
Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005) testimony that she was both afraid of and tried to be friends
(citing GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, with Jason Moran. Id. at 458. Vaive's argument amounts
834 (6th Cir. 1999) ). to an assertion that Plaintiff's inconsistency impeaches her
credibility. The jury found otherwise, and the Court may not
“To constitute ‘newly discovered evidence,’ the evidence make credibility determinations when considering a motion
must have been previously unavailable.” Leisure Caviar, for judgment notwithstanding the verdict.
LLC v. U.S. Fish & Wildlife Serv., 616 F.3d 612, 617
(6th Cir. 2010) (quoting GenCorp, 178 F.3d at 834). The *3 Vaive further maintains that Plaintiff provided
Court has determined evidence was previously available— insufficient evidence because her other allegations lacked
and thus insufficient to warrant an amended judgment—if “enough detail to support ... [her] sexual harassment claim.”
it “could have been previously submitted in the exercise of Id. Plaintiff testified that Mr. Ivory grabbed her between the
reasonable diligence[.]” Hurst v. Fed. Nat'l Mortg. Ass'n, No. legs, unknown coworkers walked behind her with a “wide

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 2

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3180 Page 30 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

load” sign, another coworker solicited her for sex on multiple conduct. Id. at 461. In addition to Plaintiff's testimony,
occasions, and coworkers made repeated sexual comments. the parties jointly entered Plaintiff's letter complaining of
harassment to Vaive management. Mr. Scroggs, Vaive's Vice
Vaive draws a distinction between credible and sufficient President, testified that he was unaware of any incidents
evidence and argues that Plaintiff failed to provide sufficient involving Plaintiff other than her allegation that Mr. Ivory
evidence because her allegations lacked “consistency and grabbed her between the legs. Id. at 462. 4 Based on
detail[.]” Id. at 459. But Plaintiff's prima facie testimony, if the competing testimonies of Plaintiff and Mr. Scroggs, a
taken in the light most favorable to Plaintiff, is sufficient for a reasonable jury could find that Plaintiff reported each incident
reasonable jury to find that Plaintiff was more likely than not of harassment.
subjected to unwelcome harassment.
*4 According to Vaive, after Plaintiff complained of Mr.
Ivory touching her, Vaive sent him home and then Plaintiff's
2. Hostile or Abusive Harassment. managers routinely checked to make sure she was okay. See
id. On direct-examination, however, Mr. Ivory testified that
Vaive maintains that Plaintiff's testimony was insufficient to he had never been disciplined in any way while working at
support a finding that her work environment was hostile or Vaive. Based on the foregoing evidence, taking the evidence
abusive. Id. at 460. Vaive argues that Plaintiff represented in the light most favorable to the Plaintiff, a reasonable jury
that her “harassment was de facto severe and pervasive, with could find that Vaive failed to take appropriate remedial action
no independent, reliable evidence regarding the frequency, and that Plaintiff satisfied her prima facie case.
or how it changed her working environment[.]” Id. at 461.
The frequency of conduct, its severity, whether the conduct
is physically threatening or humiliating, and whether it B. Vaive's Defenses
interferes with an employee's performance are all factors Vaive then had to prove its affirmative defenses by a
weighing on whether harassment is hostile or abusive. See preponderance of the evidence. Particularly, Vaive was
Harris v. Forklift Sys., Inc., 510 U.S. 17, 23 (1993). required to demonstrate that (1) it took reasonable care to
prevent harassment and (2) Plaintiff unreasonably failed to
Plaintiff testified to multiple instances of harassment but avail herself of Vaive's harassment-prevention and correction
could not provide specific details or estimate the number of policy. ECF 29, PgID 423. But Vaive's argument fails to
times certain events happened. She testified that Mr. Ivory acknowledge that Plaintiff testified at trial that she repeatedly
grabbed her between the legs. She testified that someone notified her supervisors of all incidents of harassment.
told her that she would “choke on his dick.” ECF 35, She further testified that all but one of these allegations
PgID 460–61. A reasonable jury could find those allegations went unaddressed. And Mr. Ivory testified that Vaive never
to be severe, physically threatening or humiliating, or too disciplined him for his alleged touching of Plaintiff.

frequent. 3 Plaintiff's testimony, if taken in the light most

Plaintiff did testify that her supervisors would check in on
favorable to her, is sufficient for a reasonable jury to find that
her to make sure she was okay. Moreover, unrebutted record
more likely than not Plaintiff's work environment was hostile
evidence shows that Vaive adopted an anti-harassment policy
or abusive.
and that all Vaive employees were required to read it.

Vaive avers that Plaintiff's “blanket allegation that she

3. Vicarious Liability reported all harassment” to her supervisors is insufficient
because “she could not recall when or what she told her
To be vicariously liable, Plaintiff had to demonstrate that supervisors regarding the alleged harassment.” ECF 35, PgID
Vaive knew, or should have known, of the harassment and that 465.
Vaive failed to take appropriate remedial action.
When taking all evidence in the light most favorable to
Vaive argues that Plaintiff's “generalized assertions that she Plaintiff, a reasonable jury could decide that Vaive failed to
informed her supervisors of allegations of harassment every show by a preponderance of the evidence that Plaintiff did
time they occurred” were insufficient to establish that Vaive's
management knew or should have known of the harassing

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 3

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3181 Page 31 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

not avail herself of a reporting procedure or that Vaive took this testimony as “a lie,” but it is possible to both be afraid of a
reasonable care to respond to Plaintiff's concerns. coworker and still try to make the best of the situation. Vaive
rebutted Plaintiff's testimony with other Vaive employees,
which created a he-said, she-said dynamic during trial. The
C. Conclusion evidence in the case was not so clearly in Vaive's favor that
Vaive's arguments conflate the sufficiency of evidence and the no “reasonable juror could [have] reach[ed] the challenged
credibility of it. As the joint jury instructions stated, the jury verdict[.]” Barnes, 201 F.3d at 821. A new trial on the basis
had to “determine which witnesses to believe and what weight of the weight of the evidence is therefore not appropriate.
to give their testimony.” ECF 29, PgID 418. The jury had to
consider “each witness's ability and opportunity to observe,
his or her memory, manner while testifying, any interest, B. Prohibition on “Golden Rule” Arguments
bias, or prejudice, and the reasonableness of the testimony The prohibition on “Golden Rule” arguments prohibits an
considered in the light of all the evidence.” Id. Whether attorney from suggesting that “jurors place themselves” in
Plaintiff's testimony provided consistent specifics about her a party's shoes. Johnson v. Howard, 24 F. App'x 480, 487
coworkers' misconduct or her reports to her supervisors goes (6th Cir. 2001). The Golden Rule prohibition aims to protect
to the heart of whether she is credible and not the sufficiency against jurors basing their decision on “bias and prejudice
of her testimony to support the jury's verdict. rather than consideration of the facts.” Id. (citing Lovett v.
Union Pac. R.R. Co., 201 F.3d 1074, 1083 (8th Cir. 2000) ).
Taking the evidence and drawing all reasonable inferences in Courts set aside a jury's verdict after a violation of the Golden
favor of Plaintiff, there was a legally sufficient evidentiary Rule prohibition if “there is a reasonable probability that
basis for a reasonable jury to find for Plaintiff. The Court will the verdict was influenced by those arguments.” Bridgeport
therefore deny Vaive's motion for judgment notwithstanding Music, Inc. v. Justin Combs Publ'g, 507 F.3d 470, 478
the verdict. (6th Cir. 2007) (quotation omitted). To gauge whether it is
reasonably probable that a comment influenced a jury verdict,
courts consider “the totality of the circumstances, including
II. Motion for a New Trial the nature of the comments, their frequency, their possible
Vaive argues that the jury's verdict is against the clear weight relevancy to the real issues before the jury, and the manner
of the evidence, that Plaintiff's counsel's violation of the in which the parties and court treated the comments” among
“Golden Rule” prohibition prejudiced Vaive, and that newly- other factors. City of Cleveland v. Peter Kiewit Sons' Co., 624
discovered evidence warrants a new trial. ECF 36. F.2d 749, 756 (6th Cir. 1980). A violation of the Golden Rule
prohibition may require a new trial if, given the totality of
the circumstances, “the improper statement was made with
A. Weight of the Evidence
the purpose of inflaming jury prejudice.” Mich. First Credit
Vaive renews its argument that Plaintiff's “contradictory and
Union v. Cumis Ins. Soc., Inc., 641 F.3d 240, 249 (6th Cir.
inconsistent testimony[ ] demonstrates that the verdict was
2011).
against the clear weight of the evidence and a reasonable
juror could not have found in favor of Plaintiff.” Id. at 597.
Vaive avers that during closing arguments Plaintiff's counsel
Vaive's argument rests upon the same testimony as its motion
violated the Golden Rule prohibition twice: once by asking
for judgment notwithstanding the verdict. Compare ECF 36,
the jury to step into Plaintiff's shoes and again by asking the
PgID 580–587 with ECF 35, PgID 448–455.
women of the jury to step into the Plaintiff's shoes. ECF 36,
*5 Comparing the proofs and weighing the evidence does PgID 591. 6 Vaive takes particular umbrage with Plaintiff's
not justify setting aside the jury's verdict. Although Plaintiff counsel's second violation of the Golden Rule prohibition.
failed to provide specifics for many of her allegations of And rightfully so.
harassment, she testified that Mr. Ivory grabbed her between
the legs, that coworkers carried a “wide load” sign behind her, But, in the totality of the circumstances, the Court cannot
say that there is a reasonable probability that the verdict was
and that a coworker propositioned her for sex. 5
influenced by Plaintiff's counsel's violation of the Golden
Rule prohibition. Given the nature of the comments and their
She further testified that she was afraid of Mr. Moran, but that
she also sought to be friendly with him. Vaive characterizes

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 4

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3182 Page 32 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

relevancy to the Plaintiff's claims, there is some concern about ECF 36, PgID 600. Although the non-disclosure may affect
jury prejudice. the calculation of damages—as discussed infra. Part III.B.—it
did not infect the trial in such a way that the whole proceeding
*6 But other considerations favor maintaining the jury was “unfair to the moving party[.]” Cummins, 727 F.3d at 509.
verdict. First, defense counsel did not object during the The newly-discovered evidence does not justify a new trial.
closing, so nothing drew the jury's attention to the comments The Court will therefore deny Vaive's motion for a new trial.
as problematic. The Court conducted a sidebar with the
parties after closing arguments and defense counsel voiced
his concern with the comments. The Court addressed Vaive's III. Motion to Alter or Amend Judgment
particular concern during jury instructions by reminding the Vaive seeks to alter or amend the judgment based on either a
jury to not place themselves in the position of any party, but clear error of law or newly-discovered evidence. See ECF 37,
to consider all the evidence presented. PgID 734. The Court will address each basis in turn.

Second, the parties' jointly-submitted jury instructions cured

A. Clear Error of Law
any prejudice arising from an improper argument. See,
Vaive argues that there was a clear error of law because
e.g. Cumis, 641 F.3d at 249–50 (collecting cases). The
Plaintiff “failed to produce sufficient evidence to support
Court instructed the jurors as follows: “[s]ympathy must
not influence your decision;” “[t]he lawyers' statements and her claims for emotional distress.” ECF 37, PgID 734. 7
arguments are not evidence;” and “consider all the evidence Emotional distress damages “must be proven by ‘competent
in the light of your own general knowledge and experience in evidence.’ ” Turic v. Holland Hosp., Inc., 85 F.3d 1211, 1215
the affairs of life[.]” ECF 29, PgID 409, 411, and 416. Given (6th Cir. 1996) (quoting Carey v. Piphus, 435 U.S. 247, 264
the totality of the circumstances, the jury instructions cured n.20 (1978) ). Competent evidence includes a showing of “the
any prejudice arising from Plaintiff's counsel's comments, and nature and circumstances of the wrong and its effect on the
thus his violation of the Golden Rule prohibition does not plaintiff.” Carey, 435 U.S. at 264.
justify a new trial.
*7 Here, Plaintiff testified to the nature of the circumstances
of the harassment and further testified that the harassment
C. Newly-Discovered Evidence resulted in the following harms: (1) a general fear of men,
Finally, Vaive argues that Plaintiff's “failure to disclose the ECF 37, PgID 730; (2) a deterioration of her relationship with
six-year litigation involving her parental rights as to her her children, id. at 731; and (3) an inability to attend narcotics-
children was unfair to Vaive” and thus warrants a new trial. anonymous meetings requiring interactions with men, id. at
ECF 43, PgID 826 (emphasis in original). 733. Plaintiff asserts that she also testified that “she stays in
her room and cries all day.” ECF 41, PgID 813.
As a preliminary matter, the parties dispute what
constitutes newly-discovered evidence. Plaintiff argues that Vaive represents that Plaintiff also testified that, after her
newly-discovered evidence “must have been previously termination at Vaive, she worked with men and served men.
unavailable.” GenCorp, Inc., 178 F.3d at 834. Vaive argues ECF 37, PgID 730. Vaive further maintains that Plaintiff
that the correct standard for a Rule 59(a) motion is that the “contradicted herself on cross examination, stating that she
evidence must not have been discoverable “in the exercise of discussed the alleged harassment at Vaive at her narcotics
reasonable diligence.” Nagle Indus., Inc. v. Ford Motor Co., anonymous meetings.” Id. at 733. 8
175 F.R.D. 251, 256 (E.D. Mich. 1997). The case Vaive cites,
however, applies to Rule 59(e) motions. See id. Vaive thus Vaive argues that Plaintiff's testimony falls short of the
engages in the error that it accuses Plaintiff of committing. showing required by Carey and directs the Court's attention
See ECF 43, PgID 826 (arguing Plaintiff's response cites the to two Sixth Circuit cases in which the Sixth Circuit
standard under Rule 59(e), not Rule 59(a) ). found that a plaintiff failed to make the proper showing of
emotional distress. See id. at 734–36. Each case is readily
Even if evidence of Plaintiff's litigation history constituted distinguishable from Plaintiff's case.
newly-discovered evidence, the evidence is insufficient to
require a new trial. Vaive notes that the evidence is important
“for the purposes of Plaintiff's alleged emotional distress[.]”

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 5

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3183 Page 33 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

First, in Erebia, the plaintiff testified only “that he was ‘highly www.stclaircounty.org/dcs/search.aspx (search: “Murphy”
upset’ about the [racial] slurs and that ‘you can only take so for last name and “Crystal” for first name). 9 Rather, the
much.’ ” Erebia v. Chrysler Plastic Prods. Corp., 772 F.2d searches reveal a case caption and minimal identifying
1250, 1259 (6th Cir. 1985). The Sixth Circuit remanded to the information.
district court for an entry of judgment for nominal damages.
Id. Second, even if the records were available online, reasonable
diligence would not have led an attorney to the information.
Second, in Betts, one plaintiff testified that she was “ ‘upset’ Defense counsel would have needed to identify the county
and ‘disappointed’ that she had lost her job,” that she in which a proceeding occurred and the type of proceeding
considered the racism she faced “a smack in the face,” and that (probate, civil, or otherwise). There is no reason to think that
she asked “[h]ow many times are you going to smack me in reasonable research would have revealed the probate case.
the face before I stand up and make a stand?” Betts v. Costco
Wholesale Corp., 558 F.3d 461, 471–72 (6th Cir. 2009). The Third, and most importantly, not considering the probate case
Sixth Circuit reversed because the plaintiff's “generalized would allow Plaintiff to benefit from her own wrongdoing.
comments are not sufficient to support an award of emotional While under oath at her deposition, Plaintiff testified that
distress[.]” Id. at 473. she had been involved in only two court cases. See ECF
37-2, PgID 743 (verifying oath), 745–46 (testimony regarding
Plaintiff's testimony exceeds the Erebia and Betts' plaintiffs' litigation history). Plaintiff had a hearing in the probate case
minimal testimony of generalized emotions. She testified on September 5, 2017 and Vaive deposed her on December
to at least three specific ways in which the harassment at 27, 2017. Compare ECF 37-5, PgID 777 (listing date for
Vaive caused her emotional distress. Her testimony was more probate court hearing) with ECF 37-2, PgID 743 (listing date
complete than that presented in Erebia or Betts and satisfied for deposition). It is highly improbable that in the course
Carey's competent-evidence requirement for a showing of of three and one-half months Plaintiff forgot about a more
emotional damages. There was no clear error of law justifying than six-year long probate proceeding. Had Plaintiff disclosed
an amended judgment. that she was party to a probate case in St. Clair County
—or even that she had been a party to a certain number
of cases in specific counties—then, perhaps, a reasonably
B. Newly-Discovered Evidence
diligent attorney would have uncovered the probate case. It
Vaive maintains that the discovery of a parental-rights case
was not unreasonable for Vaive to rely upon Plaintiff's sworn
from probate court provides “additional evidence” that would
deposition testimony and to not conduct further research into
have impacted the jury's consideration of Plaintiff's claim of
her litigation history.
emotional distress. ECF 37, PgID 736–37. Newly-discovered
evidence is evidence that could not have been discovered
The Court therefore finds that Vaive could not have
through reasonable diligence. See Hurst, 2015 WL 1757225,
discovered the probate case with reasonable diligence
at *1.
and thus the probate case constitutes “newly-discovered

Plaintiff failed to disclose the probate case during her evidence.” 10

deposition. See ECF 37-2, PgID 745–46 (Plaintiff's
deposition transcript showing she talked about a civil case Having found that the probate case is newly-discovered
involving a car accident, a criminal case for the use of opiates, evidence, the Court must now consider whether the evidence
but no other cases). Plaintiff does not dispute her failure to justifies an alteration or amendment of the judgment. It does.
disclose the information but argues only that Vaive failed to
show that the probate case was “unavailable or could not have The probate case reveals that Plaintiff lost custody of her
been obtained through due diligence prior to the trial and the children for nearly six years. Vaive argues that Plaintiff's
jury's verdict.” ECF 41, PgID 813. relationship with her children is “strained due to the six
years her children were wards of the court and placed in
*8 The Court finds that the probate case was not previously foster care[.]” ECF 37, PgID 737. Because Plaintiff concealed
available because it could not have been discovered through the case during her deposition, the Court is unable to
reasonable diligence. First, the full records are not available determine whether her children actually feel that way, but the
online. See St. Clair County Court Records Search, http:// reasonable inference is that six years in foster care would

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 6

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3184 Page 34 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

WHEREFORE, it is hereby ORDERED that Defendant's

impact children's relationships with a parent. Nevertheless,
motion for judgment notwithstanding the verdict [35] is
it is possible—as Plaintiff testified—that her experience of
DENIED.
harassment at Vaive also impacted her relationship with her
children.
IT IS FURTHER ORDERED that Defendant's motion for
new trial [36] is DENIED.
*9 Vaive asks the Court to reduce Plaintiff's award to
nominal damages of $1.00. Id. But Plaintiff did testify that she
IT IS FURTHER ORDERED that Defendant's motion to
suffered emotional distress because she cried all day, could
amend the judgment [37] is GRANTED IN PART AND
not interact with men, and had a strained relationship with
DENIED IN PART.
her children. The jury decided that the combination of these
reasons justified $10,000 in relief. The newly-discovered
The Court will enter an amended judgment separately.
evidence mitigates the strength of portions of Plaintiff's
testimony. The Court will therefore reduce her award to
SO ORDERED.
$6,700.

All Citations
ORDER
Not Reported in Fed. Supp., 2019 WL 117337, 2019 Fair
Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

Footnotes
1 Rule 50(a) provides the standard for analyzing a Rule 50(b) motion because Rule 50(b) is a procedural mechanism to
renew a Rule 50(a) motion for judgment as a matter of law after a jury verdict and entry of judgment. Unitherm Food Sys.,
Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 399–400 (2006).
2 Vaive neither requested nor cited to trial transcripts to support its motions. Rather, it relied upon its and the Court's
recollection of the testimony presented. Vaive did state its belief that the motions were “properly filed since the Court
personally witnessed the evidence entered into the record at trial,” but offered to supplement its briefings with citations
to the Court. See, e.g. ECF 42, PgID 821.
3 Vaive argues that “Plaintiff did not provide any testimony that the alleged harassment changed her working conditions.”
Id. at 461 (emphasis in original). That factor is not dispositive, but one among others that courts consider in the hostile or
abusive work environment analysis. Moreover, based on Plaintiff's allegations, a reasonable jury could reasonably infer
that Plaintiff's coworkers' conduct altered the conditions of employment. Plaintiff did not need to quit her job to show that
her work conditions were hostile or abusive. See id. (arguing the insufficiency of Plaintiff's argument because “[i]n fact,
Plaintiff continued working at Vaive until she was laid off”).
4 He also apparently testified that other Vaive management personnel were not aware of any other allegations, but that
evidence is speculative and inadmissible hearsay. See ECF 35, PgID 462.
5 At trial she testified that the man who propositioned her for sex was named “Pep,” whereas her responses to
interrogatories named him “Gilbert.” ECF 36-17, PgID 676.
6 Here, a citation to a trial transcript would have been most helpful to the Court.
7 It is unclear whether Vaive's argument truly presents a “clear error of law” question because it does not identify a legal
ruling made by the Court that was in error. Nevertheless, out of an abundance of caution, the Court will address Vaive's
argument under the applicable standard.
8 Whether Plaintiff's testimony is credible given her contradictory testimony does not relate to whether there was a clear
error of law because credibility determinations are an issue of fact for the jury. See United States v. Schultz, 855 F.2d
1217, 1221 (6th Cir. 1988) (“Witness credibility is solely within the province of the jury.”).
9 Plaintiff argues that the case is “entirely [a] matter[ ] of public record, obtainable ... through Pacer from Macomb County
Circuit Court records.” ECF 40, PgID 803. But Plaintiff's argument overstates the availability of the records and proves
the point that a reasonable attorney would have difficulty deciding which county to search for public records because the
case was in St. Clair County and not Macomb County.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 7

Case 2:19-cv-13429-PDB-DRG
Murphy ECF No.in 84-6
v. Vaive Wood Products Co., Not Reported filed
Fed. Supp. 08/03/20
(2019) PageID.3185 Page 35 of 55
2019 Fair Empl.Prac.Cas. (BNA) 4690, 103 Empl. Prac. Dec. P 46,196

10 Even if the probate case were not newly-discovered evidence, however, the Court would consider it to prevent manifest
injustice because Plaintiff's relationship to her children helped undergird her claim for damages in this case and the
probate case relates directly to the efficacy of her damages argument.

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

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Case 2:19-cv-13429-PDB-DRG ECF No. 84-6 filed 08/03/20 PageID.3186 Page 36 of 55

Attachment 6
Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3187 Page 37 of 55

Aftertreatment systems, when functioning properly, cause

the engine to produce exhaust within applicable emissions
2020 WL 4366061
limits. ECF No. 34, PageID.5173 (Cummins Mot. to Dismiss
Only the Westlaw citation is currently available.
Br.). These systems represent an auto-industry response to
United States District Court, E.D.
the increasing push for clean-diesel emissions and new
Michigan, Southern Division.
regulations for diesel trucks issued by the Environmental
JEREMY RAYMO, et al., Plaintiffs, Protection Agency (“EPA”) and are commonly installed in
v. medium and heavy-duty diesel trucks. See ECF No. 17,
FCA US LLC and CUMMINS INC., Defendants. PageID.2479 (Am. Compl.). The primary components of an
aftertreatment system are the Selective Catalytic Reduction
2:17-cv-12168 system (“SCR”), and the Diesel Particulate Filter (“DPF”).
| The SCR helps capture and reduce NOx into less harmful
07/30/2020 substances, such as nitrogen and oxygen, essentially cleaning
the exhaust before trucks emit it into the environment. 1
TERRENCE G. BERG, UNITED STATES DISTRICT ECF No. 17, PageID.2484, ECF No. 34, PageID.5173. The
JUDGE DPF traps and removes particulate emissions. ECF No. 17,
PageID.2484.

ORDER GRANTING IN PART AND DENYING IN 1 NOx refers to oxides of nitrogen, which Plaintiffs
PART DEFENDANTS’ MOTIONS TO DISMISS
describe as “several compounds comprised of nitrogen
and oxygen atoms.” ECF No. 17, PageID.2483.
*1 Plaintiffs seek to bring a nationwide class action alleging
NOx emissions form in the engine’s cylinder during
defects in the emissions aftertreatment systems of model year
high-temperature combustion. Id. These emissions
2013–2017 Dodge 2500 and 3500 Ram trucks with Cummins
“contribute[ ] to nitrogen dioxide, particulate matter in
6.7-liter diesel engines (the “trucks” or “class vehicles”). the air, and react[ ] with sunlight in the atmosphere to
Defendant FCA US LLC (“FCA”) manufactured the trucks form ozone.” Id.
while Defendant Cummins, Inc. (“Cummins”) manufactured
The crux of this case is the allegation that FCA and
the engines. According to Plaintiffs, Defendants misleadingly
Cummins deceived consumers by marketing the trucks as
advertised the trucks as both fuel-efficient and emissions
high-performing, low-emission, reliable vehicles with good
regulation-compliant while knowing that two separate defects
fuel economy, ECF No. 17, PageID.2490, when defects in
in the aftertreatment system would actually cause the trucks
their aftertreatment system actually caused the trucks to
to be less efficient and to exceed applicable emissions
emit NOx in excess of EPA emissions standards and to fall
standards. In a 438-page Amended Complaint supplemented
below promised fuel-economy performance. ECF No. 17,
by 56 exhibits, Plaintiffs assert claims under the Racketeer
PageID.2480. By concealing the existence of these defects,
Influenced and Corrupt Organizations Act (“RICO”), 18
Plaintiffs claim FCA and Cummins deprived consumers of
U.S.C. § 1962(c)–(d), the Magnuson-Moss Warranty Act
the benefit of their bargain, causing them to pay more for
(“MMWA”), 15 U.S.C. § 2301, as well as claims under
the trucks than they would have had they known about the
the laws of 18 different states for breach of contract,
defects. Plaintiffs further allege that the trucks’ defects caused
unjust enrichment, fraudulent misrepresentation, fraudulent
them to “pay more at the pump,” because of reduced mileage
omission, and violation of consumer-protection statutes.
efficiency, and to pay more for necessary replacement parts.
Pending before the Court are motions to dismiss filed by FCA,
ECF No. 17, PageID.2490–91.
ECF No. 35, and by Cummins, ECF No. 34. The Court will
grant in part and deny in part the motions to dismiss.
*2 According to Plaintiffs, the class vehicles contained
two defects, which they call the “washcoat defect” and the
“flash defect.” The “washcoat defect” refers to a problem
BACKGROUND with the sealant (or washcoat) used for the SCR’s interior
lining. Plaintiffs claim that the type of washcoat used rendered
Plaintiffs allege that Defendants manufactured, marketed, and
the SCR ineffective in reducing the trucks’ NOx emissions.
sold the trucks with defects in their aftertreatment system.
The “flash defect” refers to a problem of soot build-up in

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3188 Page 38 of 55

the DPF that Defendants were allegedly fixing by “flashing” exhibiting the emissions issue “the average NOx emissions
or reprogramming the trucks’ Electronic Control Modules to were 0.1 g/mile over the 0.2 g/mile NOx standard.” ECF No.
divert more fuel into the exhaust system in order to burn away 36-1, PageID.5675 (EPA Emissions Defect Inf. Report). The
the excess soot, thereby allegedly reducing fuel mileage at the defect appeared present in at least 896 trucks of those 188,271
expense of consumers. ECF No. 17, PageID.2480–90. potentially affected (though Cummins did not test each
potentially affected truck). ECF No. 36-1, PageID.5677–79.
As to the “washcoat” defect, ordinarily the SCR’s interior Cummins’s report further explained that the washcoat issue
lining or “washcoat” facilitates the conversion of NOx “may cause some MY2013-2015 RAM 2500/3500 vehicles to
emissions produced by diesel engines into nitrogen gas, experience degradation with the selective catalyst reduction
water, and carbon dioxide. ECF No. 17, PageID.2480. (SCR) system.” ECF No. 36-1, PageID.5675. After receiving
But according to Plaintiffs, the class vehicles’ defective Cummins’s report, the Environmental Protection Agency
washcoat “almost immediately” caused the vehicles to exceed (“EPA”) and California Air Resources Board (“CARB”)
emissions standards. ECF No. 17, PageID.2480. Because of requested that Cummins, because it held the class vehicles’
this defect, Plaintiffs assert, the trucks exceeded applicable Certificates of Compliance (“COCs”) and Executive Orders
emissions limits by 50%. ECF No. 17, PageID.2484. If left (“EOs”), submit a voluntary recall plan addressing the
untreated, Plaintiffs claim the washcoat defect can cause emissions issue. 2 ECF No. 17, PageID.2562. FCA and
the trucks’ emissions systems to shut down and, eventually, Cummins then sued one another over who should bear the
to reduce the engines’ maximum speed to only five miles financial and logistical costs of the recall. That case ultimately
per hour. ECF No. 17, PageID.2484–85. They refer to this settled. ECF No. 34, PageID.5157.
as “limp mode.” Id. At least some of the Plaintiffs claim
their trucks were forced into “limp mode” as a result of 2 As the engine manufacturer, Cummins was responsible
the washcoat defect, creating safety risks and out-of-pocket
for obtaining COCs from the EPA verifying that the
expenses. Id.
trucks met federal emissions standards. ECF No. 17,
PageID.2546–47; ECF No. 34, PageID.5173. Vehicles
As to the injury caused by the washcoat defect, mainly sold in California also required an EO from CARB,
Plaintiffs contend they were injured at the point of sale which Cummins was likewise responsible for securing.
because they paid more for the trucks than they would have ECF No. 17, PageID.2546–47.
had they known about the defect, which allegedly caused the
*3 The process of rolling out the voluntary recall began in
trucks to pollute at higher levels than Plaintiffs expected based
November 2016, according to Cummins, but appears not to
on Defendants’ representations and “to frequently enter into
have been announced by the EPA until July 2018. ECF No.
‘limp mode.’ ” ECF No. 17, PageID.2487–88.
34, PageID.5157, 5174; ECF No. 36-2, PageID.5685 (Jul.
31, 2018 EPA Press Release). Cummins and FCA worked
According to the Amended Complaint, FCA and Cummins
together to recall thousands of model year 2013–2015 trucks
became aware of the washcoat defect “as early as September
so that FCA dealers could replace the trucks’ SCR catalysts—
2014” yet took no immediate steps to remedy it. ECF No. 17,
free of charge to consumers—with a newer version containing
PageID.2485. Instead, Plaintiffs assert, Defendants continued
an updated washcoat, thus resolving the defect. ECF No.
to misleadingly market the trucks as EPA-compliant and
35, PageID.5630; ECF No. 36-5, PageID.5695–96 (Cummins
equipped with “the lowest emitting diesel engine ever
Influenced Recall Plan). This newer washcoat was already
produced.” ECF No. 17, PageID.2481 (quoting ECF No.
being used in model year 2016 and later trucks. An EPA
17-2, Ram Owner’s Manual, Ram Truck Diesel Supplement
administrator lauded the recall as “a great example of how
(2013)). FCA acknowledges it began receiving an increasing
government and industry work together to protect health and
number of emissions-related warranty claims pertaining to
environment.” He continued, “[t]his is the way it’s supposed
model-year 2013–2015 trucks around this time. See ECF No.
to work.” ECF No. 36-2, PageID.5685.
35, PageID.5628 (FCA Mot. to Dismiss Br.); ECF No. 34,
PageID.5173.
The “flash defect” is the second defect at issue in this lawsuit.
Plaintiffs allege that the DPF in the trucks’ aftertreatment
In response, Cummins conducted emissions testing on a
system routinely becomes clogged with soot. ECF No. 17,
number of affected trucks. That testing, which Cummins
PageID.2488. Plaintiffs suggest this alleged problem with the
reported to the EPA on March 5, 2015, showed that for trucks
DPF is caused by “the configuration of the two emissions

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3189 Page 39 of 55

catalysts,” though they do not explain what exactly the issue defect caused his truck’s miles-per-gallon usage to drop
is with how the catalysts are configured, or why it would “approximately 20-25%.” ECF No. 17, PageID.2495. But he
cause soot to clog the DPF. 3 ECF No. 17, PageID.2488. clarifies that “the Truck’s MPG has dropped by approximately
When the DPF becomes clogged, Plaintiffs allege, the trucks three MPG after his Truck was ‘flashed.’ ” ECF No.
enter “active regeneration mode,” a process which burns more 17, PageID.2495. As the Amended Complaint describes
fuel to clear the filter. ECF No. 17, PageID.2488. Active it, Raymo and other named Plaintiffs thus associate their
regeneration, according to Plaintiffs, can also cause the class declining fuel economy—the injury Plaintiffs attribute to the
vehicles to enter “limp mode,” necessitating that owners flash defect—more with “flashing,” the dealerships’ alleged
bring their trucks into an FCA dealership for service within remedy for the DPF defect, than with the DPF defect itself.
a certain number of miles to prevent them from becoming
inoperable. ECF No. 17, PageID.2488. According to some *4 Plaintiffs are 18 consumers who purchased or leased one
of the Plaintiff owners, when they brought their vehicles in of the class vehicles on or before October 4, 2018. ECF No.
for routine service, the dealerships were instructed to “flash,” 17, PageID.2579. In addition to proposing a nationwide class,
i.e. reprogram, the vehicles’ Electronic Control Modules in they seek to certify subclasses of individuals or entities in 18
order to address the DPF soot build-up issue. ECF No. 17, different states who owned or leased a class vehicle during
PageID.1488. the relevant period. Those states are Alabama, California,
Colorado, Florida, Georgia, Idaho, Kentucky, Michigan,
3 Mississippi, New Jersey, North Carolina, Ohio, Oklahoma,
A footnote in the Amended Complaint alleges that,
Pennsylvania, Texas, Utah, Virginia, and Washington.
beginning in the 2013 model year trucks, “the DPF was
Plaintiffs assert federal claims under the RICO Act, 18 U.S.C.
placed between the diesel oxidation catalyst and the SCR
catalyst,” while in earlier model year trucks the DPF § 1962(C)–(D), and the MMWA, 15 U.S.C. § 2301. They also
was “next to the muffler, and the emissions first passed allege violations of the same 18 states’ breach of contract,
through two catalysts before it reached the [DPF] filter.” fraudulent misrepresentation, fraudulent omission, consumer
ECF No. 17, PageID.2488 n.19. Plaintiffs provide no protection, and unjust enrichment laws. Pending before the
allegations or analysis explaining why the more recent Court are motions to dismiss filed by FCA, ECF No. 35, and
configuration would cause the DPF to become clogged. by Cummins, ECF No. 34. The Court will grant in part and
This reprogramming, Plaintiffs assert, caused the trucks’ deny in part both motions to dismiss.
emissions systems to run at higher temperatures, diverting
more fuel to burn out the soot in the DPF. ECF No. 17,
PageID.2488. After the flashing had been applied, Plaintiffs LEGAL STANDARD
claim their vehicles’ fuel economy dropped by 20– 25%,
costing them significantly more in diesel fuel purchases I. Rule 12(b)(6)
annually. ECF No 17, PageID.2489. The Amended Complaint Rule 12(b)(6) of the Federal Rules of Civil Procedure
asserts that “[t]ruck owners” were often not even informed authorizes courts to dismiss a lawsuit if they determine that
that the dealership was “flashing” their trucks. ECF No. 17, the plaintiff has “fail[ed] to state a claim upon which relief
PageID.2489. The pleading does not elaborate as to whether can be granted.” In evaluating a motion to dismiss under
Plaintiffs themselves were told that their trucks were being Rule 12(b)(6), courts “must construe the complaint in the
flashed by FCA dealerships. light most favorable to the plaintiff, accept all well-pled
factual allegations as true and determine whether the plaintiff
In attempting to define the flash defect, Plaintiffs somewhat undoubtedly can prove no set of facts consistent with their
conflate the alleged DPF configuration issue, which sounds allegations that would entitle them to relief.” League of
like a design defect that may cause soot to clog the filter, United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th
with the dealerships’ actions in allegedly “flashing” or Cir. 2007) (citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th
reprogramming the trucks in an effort to address soot build- Cir. 2006)).
up in the DPF. Both the clogging and the “flashing,” Plaintiffs
contend, cause the trucks to burn more fuel to clear the DPF, Consideration of a motion to dismiss under Rule 12(b)(6)
although they attribute the trucks’ declining fuel economy is generally confined to the pleadings. Jones v. City of
mostly to the “flashing.” ECF No. 17, PageID.2488–89. Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). Courts may,
For example, Plaintiff Jeremy Raymo claims that the flash however, consider any exhibits attached to the complaint or

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3190 Page 40 of 55

the defendant’s motion to dismiss “so long as they are referred Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir.
to in the Complaint and are central to the claims contained 1984)).
therein.” Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d
426, 430 (6th Cir. 2008) (citing Amini v. Oberlin Coll., 259
F.3d 493, 502 (6th Cir. 2001)). The exhibits attached by the
DISCUSSION
parties in this case satisfy those parameters.
I. Plaintiffs’ claims are not preempted by the Clean Air
II. Rule 9(b)’s heightened pleading standards for fraud Act.
claimsThere are heightened pleading standards for fraud- *5 Plaintiffs’ state-law claims are premised on FCA’s
based claims. and Cummins’s alleged misrepresentations and omissions
concerning the trucks’ compliance with federal emissions
standards, rather than on allegations that those standards were
These more exacting standards apply to Plaintiffs’ RICO
violated. Because the success of Plaintiffs’ claims is not
claims and state-law claims alleging fraudulent concealment
contingent on proving Defendants’ noncompliance with EPA
or omission. See Bowlers’ Alley, Inc. v. Cincinnati Ins. Co.,
emissions regulations, their lawsuit cannot be construed as
No. 13-13804, 2015 WL 3541905, at *3 (E.D. Mich. Apr.
an effort to enforce federal emissions standards. Plaintiffs’
30, 2015) (holding that Rule 9(b)’s particularity requirement
claims are therefore not preempted by the Clean Air Act
applies to state-law claims asserted in federal court). Rule
(“CAA”), 42 U.S.C. § 7401 et seq.
9(b) provides that “[i]n alleging fraud or mistake, a party
must state with particularity the circumstances constituting
Assessing whether Plaintiffs’ state-law claims are preempted
fraud or mistake.” Fed. R. Civ. P. 9(b). But “[m]alice, intent,
by the CAA requires examining Congress’s intent, as
knowledge, and other conditions of a person’s mind may be
expressed through the statute’s plain language. See Park ‘N
alleged generally.” Id.
Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189 (1985).
This pleading standard is “slightly more relaxed” for claims of
Section 209 of the CAA provides that “[n]o State or any
fraudulent concealment or fraud by omission (as opposed to
political subdivision thereof shall adopt or attempt to enforce
affirmative fraud). Beck v. FCA US LLC, 273 F. Supp. 3d 735,
any standard relating to the control of emissions from new
751 (E.D. Mich. 2018) (quoting Baggett v. Hewlett-Packard
motor vehicles or new motor vehicle engines subject to this
Co., 582 F. Supp. 2d 1261, 1267 (C.D. Cal. 2007)). This is
part.” 42 U.S.C. § 7543(a). The Supreme Court, in Morales
because fraudulent omissions or concealments are by nature
v. Trans World Airlines, Inc., 504 U.S. 374, 383 (1992)
“more amorphous” than affirmative misrepresentations. See
described the phrase “relating to the control of emissions,”
In re Duramax Diesel Litig., 298 F. Supp. 3d 1037, 1055 (E.D.
as used in this provision, as signaling a “broad preemptive
Mich. 2018) and Counts v. Gen. Motors, LLC (“Counts I”),
purpose.” Accordingly, several courts have concluded that
237 F. Supp. 3d 572, 595 (E.D. Mich. 2017) (both Ludington,
“enforcement actions that have any ‘connection with or
J.) (observing the difficulty posed to plaintiffs by having
reference to’ the control of emissions from motor vehicles are
to pinpoint the time at which a manufacturer’s fraudulent
preempted by § 209(a).” Jackson v. Gen. Motors Corp., 770
omission occurred).
F. Supp. 2d 570, 577 (S.D.N.Y. 2011) (quoting Morales, 504
U.S. at 384).
Concerning affirmative misrepresentations, courts have held
that a fraud claim typically meets Rule 9(b)’s particularity
If Plaintiffs’ state-law claims seek to establish or enforce
requirements if it alleges: “(1) the time, place, and content of
a standard for the control of emissions, they are expressly
the alleged misrepresentation, (2) the fraudulent scheme, (3)
preempted. See Duramax, 298 F. Supp. 3d at 1059. For
the defendant’s fraudulent intent, and (4) the resulting injury.”
example, in Counts v. General Motors, LLC, 237 F. Supp. 3d
In re FCA US LLC Monostable Elec. Gearshift Litig., 280 F.
at 589 another court in this district found that to the extent
Supp. 3d 975, 1003 (E.D. Mich. 2017) (Lawson, J.) (internal
the plaintiffs were requesting damages “based solely on GM’s
quotations omitted) (quoting Wall v. Mich. Rental, 952 F.3d
alleged violations of the CAA,” those claims were preempted.
492, 496 (6th Cir. 2017)). At a minimum, the Sixth Circuit
Likewise, in Beshear v. Volkswagen Grp. of Am., Inc., No. 16-
requires that a plaintiff “must allege the time, place and
CV-27-GFVT, 2016 WL 3040492, at *4 (E.D. Ky. May 25,
contents of the misrepresentations upon which they relied.”
2016) the court determined that plaintiffs could not premise
Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (citing
state-law claims solely on their allegation that the defendants

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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were violating the CAA’s emissions standards. Finally, this standards is by no means essential to their success. Because
Court recently held in Bledsoe v. FCA US LLC (“Bledsoe this is not an action seeking to enforce EPA emissions
II”), 378 F. Supp. 3d 626, 642 (E.D. Mich. 2019) that regulations, the Court concludes Plaintiffs’ claim are not
claims involving alleged misrepresentations and omissions preempted by the CAA.
about vehicles’ emissions technology are not preempted by
the CAA because such claims “do not depend on proof
of noncompliance with federal emissions standards.” (citing II. Plaintiffs have established Article III, Section 2
Counts v. Gen. Motors, LLC (“Counts II”), No. 16-cv-12541, standing for claims related to the washcoat defect in
2018 WL 5264194, at *2 (E.D. Mich. Oct. 23, 2018)). 2013–2015 model year trucks, and the flash defect in
2013–2016 trucks.
A close reading of Plaintiffs’ amended pleading shows their The existence of the washcoat defect in the 2013–2015
claims are rooted in allegations of false statements and model year trucks is sufficiently and plausibly pled by all
omissions concerning the trucks’ fuel efficiency, compliance Plaintiffs. Plaintiffs provide detailed allegations about the
with applicable environmental regulations, and alleged washcoat defect that appeared in some unknown percentage
defects. Plaintiffs claim FCA and Cummins misled them of 2013–2015 model year trucks, resulting in the recall.
about the trucks’ emissions rates, leading them to purchase Although they do not specifically plead that their own trucks
the trucks at a higher price than they would have paid had they contained this defect, Plaintiffs frame the washcoat defect as
known the truth. For example, Plaintiffs claim that “[n]one of a “design defect.” ECF No. 17, PageID.2609. Such defects,
the advertisements or representations received by Plaintiff[s] by their nature, exist in all products “possessing the faulty
contained any disclosure that the Truck has high emissions design.” McKee v. General Motors, LLC, 376 F. Supp.
compared to gasoline vehicles or the fact that the emissions 3d 751, 761 (E.D. Mich. 2019). Because defective trucks
system would break down and not perform as advertised.” are just not worth as much as defect-free trucks, Plaintiffs
ECF No. 17, PageID.2504. Similarly, Plaintiffs take issue have adequately alleged an economic injury sufficient to
with the fact that FCA stated in a 2013 owner’s manual establish standing under Article III, § 2 of the United States
that “[t]he Cummins diesel engine meets all EPA Heavy Constitution with respect to the washcoat defect in 2013–
Duty Diesel Engine Emissions Standards, resulting in the 2015 model year trucks.
lowest emitting diesel engine ever produced.” ECF No. 17,
PageID.2486 (emphasis omitted). Plaintiffs also claim that In contrast, the Amended Complaint’s allegations about the
Cummins and FCA misleadingly advertised the trucks as washcoat defect in 2016–2017 model year trucks are too
EPA-compliant when they in fact emit NOx “far in excess sparse to survive FCA’s and Cummins’s motions to dismiss.
of the levels allowed by federal law.” See ECF No. 17, Plaintiffs’ allegations concerning the washcoat defect relate
PageID.2487, 2506–07, 2553. In this case it is the alleged only to the washcoat used in the 2013–2015 trucks. As
“deceit about compliance, rather than the need to enforce Plaintiffs acknowledge, those trucks were “recall[ed] to
compliance, that is the gravamen of Plaintiffs’ claims.” In fix the defect.” ECF No. 17, PageID.2482. The Amended
re Volkwsagen “Clean Diesel” Litig., No. CL-2016-9917, Complaint contains no allegations specific to the alleged
2016 WL 10880209 (Va. Cir. Ct. Aug. 30, 2016) (finding that washcoat defect in later 2016 and 2017 trucks, which were
plaintiffs’ claims involving misleading advertising and news not part of the recall, and used a different washcoat.
releases about car manufacturer’s compliance with federal
regulations and fuel economy were not preempted by the Finally, Plaintiffs’ allegations about the flash defect are
CAA). sufficiently plausible to establish standing for claims arising
from that alleged defect in the 2013–2016 model year trucks.
*6 Plaintiffs’ state-law claims are premised on assertions Although Plaintiffs provide no detailed explanation as to
that FCA and Cummins concealed the existence of emissions- precisely what causes the trucks’ DPF filter to become
related defects in the vehicles and misleadingly marketed the clogged with soot, they do specifically allege that it clogs,
trucks as comparatively low-emissions vehicles that complied and that this requires more fuel to be diverted in order to burn
with EPA regulations. Establishing that the class vehicles out the soot—both through active regeneration mode, and as
were in fact emitting NOx in excess of EPA emissions would a result of the dealerships’ flashing of the trucks’ Electronic
certainly bolster Plaintiffs’ claims. See Counts I, 237 F. Supp. Control Modules.
3d at 592. But proving noncompliance with federal emissions

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RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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Article III of the United States Constitution provides that

federal courts may exercise jurisdiction only over an actual The Sixth Circuit’s reasoning in Rikos v. Proctor & Gamble
“case or controversy.” U.S. Const. art. III, § 2. Individual Co. is instructive. In that case, which involved a probiotic
standing is therefore a prerequisite for all suits, including nutritional supplement marketed to promote digestive health,
class actions. Fallick v. Nationwide Mut. Ins. Co., 162 F.3d the Sixth Circuit declined to require Plaintiffs to show
410, 423 (6th Cir. 1998). The Supreme Court has identified that all potential class members had suffered an injury
three elements necessary to establish standing. First, the based on their purchase of the supplement. 799 F.3d 497,
plaintiff must have sustained “an injury in fact—an invasion 524 (6th Cir. 2015). The court of appeals explained that,
of a legally-protected interest which is (a) concrete and because Plaintiffs’ theory was that the manufacturer “falsely
particularized; and (b) actual or imminent, not conjectural advertised to every purchaser” of the product, if the product
or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. was defectively designed “then every purchaser was harmed.”
555, 560–61 (1992) (internal quotations omitted). Second, Id. Similarly, the Sixth Circuit in In re Whirlpool Corporation
standing requires a “causal connection” between the injury Front-Loading Washer Products Liability Litigation,
and the challenged conduct; the injury must be “fairly another design-defect class action, concluded that not all class
traceable” to the alleged injurious conduct by the defendant. members had to demonstrate their washing machines were
Id. Potential class representatives must establish standing vis- growing biofilm and mold as a result of the design defect
à-vis each defendant; they cannot acquire standing simply by at issue. Like in this case, the plaintiffs in In re Whirlpool
virtue of bringing a class action. Fallick, 162 F.3d at 423. had argued that “all Duet owners suffered injury immediately
upon purchase of a Duet due to the design defect in, and the
decreased value of, the product itself, whether mold causing
additional consequential damages has yet manifested or not.”
A. The washcoat defect in 2013–2015 model year trucks
722 F.3d 838, 857–58 (6th Cir. 2013). Accordingly, Plaintiffs’
*7 Plaintiffs have standing to pursue claims arising from standing to assert claims arising from the washcoat defect is
the alleged washcoat defect in the 2013–2015 model year not foreclosed by the fact that not all of them purport to have
trucks. They contend they overpaid for the class trucks experienced the washcoat defect in their trucks.
at the point of purchase because FCA and Cummins led
Plaintiffs to believe the trucks were lower-emitting and As to whether Plaintiffs have adequately pled an injury,
compliant with federal emissions standards when they were the Court observes that the Sixth Circuit and other courts
not. Although FCA and Cummins have already repaired in this district have countenanced the overpayment theory
the washcoat defect in these model year trucks free of of injury advanced by Plaintiffs in connection with the
charge to consumers, Plaintiffs argue the recall and associated alleged washcoat (and flash) defects. The circuit court has
washcoat replacement have not made them whole for the found that a plaintiff who pays a premium for a product
$8,000 to $10,000 premium they paid for the promise of but does not receive the anticipated benefit demonstrates a
lower emissions, and superior fuel economy, torque, and cognizable injury in fact sufficient to establish Article III
towing ability. Although Plaintiffs would not be able to seek standing. See Wuliger v. Mfrs. Life. Ins. Co., 567 F.3d 787,
injunctive relief, Sixth Circuit precedent permits them to seek 794 (6th Cir. 2009). And district courts have determined
monetary damages in connection with the washcoat defect in that other plaintiffs’ allegations of overpayment for “clean
2013–2015 trucks under an overpayment theory of damages. diesel” vehicles that in fact polluted at levels far higher than
a reasonable consumer would expect satisfied Article III’s
Concerning the existence of the defect in 2013–2015 trucks, injury requirement. Although those cases involved defeat
Defendants rightly point out that Plaintiffs have not alleged devices (emissions-control devices that operate to bypass
the washcoat defect was present in the specific trucks or interfere with emissions-reduction technologies in certain
they purchased or leased. In the design-defect context, circumstances), there is no reason their holdings on economic
however, the Sixth Circuit has not required named plaintiffs injury cannot be applied outside that context, to emissions
and potential class members to show that they themselves system cases more broadly.
experienced the design defect. Rather, it is enough for
standing to allege only that the product was defectively *8 In In re Duramax Diesel Litigation, for example,
designed, and that the plaintiff purchased the product and General Motors had developed an allegedly defective engine,
himself or herself experienced the design defect. marketed it as environmentally friendly, and set the sale price.

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Case 2:19-cv-13429-PDB-DRG
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RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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Duramax, 298 F. Supp. 3d at 1052. The Court found plaintiffs’ The Court is not persuaded by Cummins’s argument that
allegations that they had paid a premium for a “clean diesel” Plaintiffs’ claims arising from the washcoat defect in 2013–
vehicle that did not operate in the way they expected sufficed 2015 trucks are prudentially moot because Defendants have
to establish standing using an overpayment theory of injury. already remedied that defect as part of the voluntary recall.
See id. Likewise, in Counts I the same court held that plaintiffs Where a lawsuit seeks as relief only that the manufacturer
could establish an economic injury sufficient for Article III be compelled to notify consumers of the alleged defect and
standing by alleging that General Motors had misrepresented repair it free-of-charge to consumers, a recall of the subject
the class vehicles as “clean diesel” cars and that, in reliance vehicles will moot claims for injunctive and declaratory relief.
on those representations, the plaintiffs had overpaid for them. See Hadley v. Chrysler Group, LLC, 624 F. App.’x 374,
Counts I, 237 F. Supp. 3d at 582–83. According to that court, 379 (6th Cir. 2015); Winzler v Toyota Motor Sales U.S.A.,
even if the plaintiffs had not specifically purchased the diesel Inc., 681 F.3d 1208 (10th Cir. 2012). As FCA and Cummins
cars because of their advertised clean-diesel system, they had have already repaired the washcoat defect in 2013–2015 class
paid more for the cars because of it. Id. at 584. If the clean- vehicles free of charge to consumers, injunctive or declaratory
diesel system in fact provided no additional value, the court relief is unavailable, and Plaintiffs do not request it. See ECF
reasoned, the plaintiffs had suffered financial injury in the No. 17, PageID.2903. But there is no similar legal bar that
form of overpayment “regardless of whether they relied on serves to prevent Plaintiffs from seeking monetary damages
GM’s alleged misrepresentations.” Id. in connection with the washcoat defect in 2013–2015 model
year trucks under an overpayment theory of damages.
Another court in this district also recently approved the
overpayment theory of injury in Gamboa v. Ford Motor Cummins argues that Cheng v. BMW of North America,
Company, 381 F. Supp. 3d 853, 886 (E.D. Mich. 2019) (Hood, LLC and Hadley v. Chrysler Group, LLC stand for the
C.J.). There, the Court relied on plaintiffs’ allegations that proposition that Plaintiffs should be barred from seeking
they had overpaid for a “clean diesel” vehicle that in fact monetary damages for a defect that Defendants have already
polluted at levels far higher than a reasonable consumer remedied through the recall. See No. CV 12-09262 GAF
would expect. Id. In other words, the court reasoned, the (SHx), 2013 WL 3940815 (C.D. Cal. Jul. 26, 2013); 624 F.
Gamboa plaintiffs had “paid a premium” for a product “but App.’x 374. But in Cheng the plaintiffs were not actually
did not receive the anticipated consideration.” Id. at 886. This, requesting monetary damages, so that case is inapposite. WL
Chief Judge Hood found, established a cognizable injury in 3940815, at *4 (explaining that plaintiff’s pleading stated, “at
fact. Id. (citing Wuliger, 367 F.3d at 794). this time [he] does not pray for any monetary damages as a
result of Defendants’ violations of the [applicable statute].”).
The prevailing jurisprudence in this district, as well as in the Although Hadley, a Sixth Circuit case, is more on point, the
Northern District of California, thus holds that a consumer plaintiffs in that case did not claim, as Plaintiffs in this case
who alleges she would not have purchased a vehicle (or would do, that their injury occurred at the point of purchase. 624 F.
have paid less for it) had the manufacturer not misrepresented App’x at 378. The Hadley plaintiffs’ claims were “not based
the vehicle to customers’ detriment or omitted mention of on the existence of the defect[ ]...instead they are based on
its significant limitations, has alleged a plausible injury-in- New Chrysler’s delay in implementing the promised repair.”
fact. See In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Id. The Sixth Circuit agreed with the district court that the
Practices, & Prods. Liab. Litig., 295 F. Supp. 3d 927, 945 plaintiffs could not establish a diminished-value injury “based
(N.D. Cal. 2018) (citing Hinojos v. Kohl’s Corp., 718 F.3d solely on New Chrysler’s delay” in repairing the defect. Id.
1098 (9th Cir. 2013)). Put another way, once a consumer
“sufficiently and plausibly” pleads the existence of a product *9 In this particular case, there is some concern that allowing
defect, the financial injury stemming from the defect is easily Plaintiffs to sue for monetary damages over a defect that
established: “defective cars [and trucks] are simply not worth Defendants have already remedied cuts against basic fairness
as much.” In re Toyota Motor Corp., 790 F. Supp. 2d 1152, and may disincentivize manufacturers from incurring the
1163 (C.D. Cal. 2011). Plaintiffs have adequately pled facts expense of voluntary recalls in the first place. Nonetheless,
that create standing to assert claims related to the washcoat because Plaintiffs claim their injury occurred at the point of
defect in 2013–2015 model year trucks. purchase, and that the recall did not necessarily remediate the
loss caused to Plaintiffs by their allegedly having to pay an
additional $8,000 to $10,000 premium based on Defendants’

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Case 2:19-cv-13429-PDB-DRG
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RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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alleged misrepresentations, Hadley does not plainly bar establishing the existence of the washcoat defect in the 2016
Plaintiffs’ claim for monetary damages in connection with or 2017 trucks and therefore have not shown any injuries
the washcoat defect in 2013–2015 class vehicles. See ECF arising specifically from this newer washcoat.
No. 18, PageID.2559–60. Plaintiffs have pled an injury in
connection with the washcoat defect in those trucks sufficient To survive a motion to dismiss in the defeat-device context,
to establish standing. courts have generally required plaintiffs to allege that their
experts, or another reputable third party, conducted rigorous
testing on the vehicles’ emissions system and identified
a defect. The washcoat defect differs fundamentally from
B. The washcoat defect in 2016–2017 model year trucks
a defeat device because defeat devices are engineered to
Plaintiffs have not sufficiently alleged an injury arising reduce the effectiveness of a car’s emissions-control system
from their purchase of the 2016–2017 model year trucks. when the vehicle is not being tested for compliance with
Establishing an economic injury using overpayment theory emission regulations. As such, defeat devices are “inherently
requires Plaintiffs to “sufficiently and plausibly” plead the deceptive” and, according to some courts, indicative of
existence of a defect in trucks they purchased or leased. “specific intent to defraud” on the part of the manufacturer.
See In re Toyota Motor Corp., 790 F. Supp. 2d at 1163. See Duramax, 298 F. Supp. 3d at 1083. Nonetheless, while
But, as to the 2017 truck, none of the Plaintiffs claim to the misleading character of the defeat device may require
have purchased or leased a truck from that model year. distinguishing those cases from non-defeat-device cases in
What’s more, Plaintiffs make no specific allegations about the context of analyzing fraud claims, there is no reason to
a washcoat defect in either the 2016 or the 2017 model differentiate between defeat-device cases and cases involving
year trucks. Plaintiffs acknowledge those trucks contained mere emissions-system defects in assessing economic injury
an entirely different washcoat than the one that was used in and standing. In both situations, the injury stems from the
the 2013–2015 vehicles that were recalled. Because of these defendant’s alleged misrepresentations or omissions about
pleading deficiencies, the Court will dismiss Plaintiffs’ claims the vehicles’ emissions rate to the EPA and to consumers as
pertaining to the washcoat defect in 2016 and 2017 model compared to the vehicles’ actual emissions rate on the road in
year trucks. normal use. And in both settings testing is useful to establish a
defect and resulting injury because vehicle emissions are not
A plaintiff has standing to assert claims stemming from a something observable with the naked eye, or by the average
defective product or false advertising only if she “experienced plaintiff. If courts in this district require specific allegations
injury stemming from the purchase of that product.” of emissions testing to establish a defect in the defeat-device
Granfield v. NVIDIA Corp., No. C 11-05403 JW, 2012 WL context, it is unclear why they should not apply that same
2847575, at *6 (N.D. Cal. Jul. 11, 2012). Because none of standard to all emissions-defect cases where the gravamen of
the Plaintiffs claim to have owned or leased a 2017 model the claim is that the defect caused excessively high emissions.
year Dodge Ram 2500 or 3500 truck with a Cummins 6.7-liter
diesel engine, any claims alleging injury from the 2017 trucks *10 Turning to what type of emissions testing courts have
must be dismissed. Plaintiffs cannot assert claims pertaining required to show injury, courts have allowed plaintiffs to
to defects in a vehicle none of them purchased. See id. survive a motion to dismiss when they have conducted their
own “scientifically valid emissions testing” on the diesel
Plaintiffs have likewise not pled facts sufficient to trucks at issue. In In re Duramax Diesel Litigation, for
demonstrate they suffered any injury arising from a washcoat example, that testing showed that the class trucks emitted
defect in the 2016 model year trucks. The Amended NOx at rates significantly higher than similar gasoline-engine
Complaint’s allegations about the washcoat defect rest on trucks. Duramax, 298 F. Supp. 3d at 1046. Data gathered
information gathered from documents pertaining to the EPA- by those plaintiffs also indicated that the class trucks were
supervised recall of model year 2013–2015 Ram 2500 and noncompliant with EPA standards and thus fell short of what
3500 trucks, and related litigation. The model year 2016– reasonable consumers would expect, especially based on the
2017 trucks use a different washcoat—the same washcoat manufacturer’s representations. Id.
FCA and Cummins deployed to remedy the defective
washcoat problem in the 2013–2015 vehicles that were Similarly, in Counts I the plaintiffs conducted their own
recalled. Plaintiffs do not offer any specific allegations emissions testing on the class vehicles and in their

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pleading explained that several European government set forth in the Amended Complaint. Because this claimed
agencies had found that other General Motors vehicles with defect does not involve the trucks’ rate of actual emissions as
engine technology similar to the class vehicles produced compared to that represented by the manufacturer, the Court
significantly higher emissions than the manufacturer finds no precedent for applying the testing requirement to the
represented. Counts I, 237 F. Supp. 3d at 583. This, according flash defect.
to the court, was “enough” to support a plausible allegation
that General Motors’s representations about the vehicles’ *11 According to the Amended Complaint, the trucks’ DPF
emissions were deceptive, and therefore to establish the routinely became clogged with soot, causing the trucks to
“concrete and particularized injury” requisite for standing. enter active regeneration mode to burn more fuel in order to
See id. at 581–83. clear the DPF. ECF No. 17, PageID.2488. Active regeneration
mode, Plaintiffs contend, also causes the trucks to enter “limp
In contrast, in Bledsoe I this Court found the plaintiffs’ mode,” necessitating that Plaintiffs bring their trucks to the
allegations about the presence of a defeat device in the class dealership for service. Id. Plaintiffs claim that when they
vehicles lacking because plaintiffs based that claim entirely brought their trucks to a FCA dealership for service, service
on emissions testing conducted on a single truck “under providers “flashed” or reprogrammed the trucks’ Electronic
poorly-defined parameters.” See Bledsoe II, 378 F. Supp. Control Modules, essentially instructing the trucks to divert
3d at 632 (discussing Bledsoe v. FCA US LLC (“Bledsoe more fuel to burn out soot in the DPF. Id. Each of the Plaintiffs
I”), 307 F. Supp. 3d 646, 657 (E.D. Mich. 2018)). This alleges that his car was “flashed,” although Plaintiffs do not
was deemed insufficient to establish a cognizable Article specify when or where. Because the Amended Complaint
III injury. In Bledsoe II, this Court examined the plaintiffs’ explains that the “flashing” occurred when Plaintiffs brought
amended complaint, which they filed after considerably their cars into FCA dealerships for servicing, the Court
expanding their emissions testing of the proposed class infers it was FCA’s representatives who carried out the
vehicles. 378 F. Supp. 3d at 632–33. In large part because reprogramming.
of this “considerably expanded” emissions testing, and the
additional detail plaintiffs provided about the nature of that Plaintiffs say they each paid a premium of between $8,000
testing, the Court permitted the bulk of the Bledsoe II to $10,000 to purchase diesel trucks with the understanding
plaintiffs’ updated allegations to proceed past the motion to that they had “better fuel economy compared to a gas
dismiss phase. See id. engine, and superior torque and towing capabilities.” ECF
No. 18, PageID.2559–60. The Amended Complaint asserts
In the instant case, Plaintiffs do not plausibly allege that the they did not receive the benefit of this bargain. After their
washcoat defect present in 2013–2015 model year vehicles trucks were “flashed,” Plaintiffs claim, the vehicles’ fuel
also plagued 2016–2017 vehicles. Without any emissions efficiency dropped 20–25 percent, causing Plaintiffs to spend
testing or other specific data relating to the performance of significantly more on diesel fuel annually. See, e.g., ECF No.
the later vehicles, which contained a different washcoat than 17, PageID.2489, 2495, 2497.
the 2013–2015 vehicles, Plaintiffs fail to adequately plead the
existence of a defect—and any resultant overpayment injury Jeremy Raymo, for example, says that his truck’s “MPG
—in the 2016 trucks. And again, their claims related to the has dropped by approximately three MPG,” costing him an
2017 trucks fail because no Plaintiff claims to have owned a additional $2,013 in fuel costs annually. Forrest Poulson
2017 model year truck. claims that after his truck was flashed its MPG dropped by
approximately five MPG, costing him about an additional
$750 in spending on diesel fuel annually. ECF No. 17,
C. The flash defect in 2013–2016 model year trucks PageID.2497. He further asserts that he incurred an additional
The Amended Complaint’s allegations concerning the flash $400 or $500 in out-of-pocket expenses when his truck went
defect are plausible enough to establish an Article III injury into limp mode as a result of the flash defect, stranding
caused by the conduct of both Defendants. Plaintiffs allege him 200 miles from home. Id. at 2497–98. Plaintiff Manuel
the flash defect caused them to experience less fuel economy Pena also says his truck’s MPG dropped by approximately
and spend more money on diesel than they would have five MPG after being “flashed,” causing him to spend an
absent the defect. In support of this injury they attribute to additional $538 on diesel fuel each year, as well as $50 in
the flash defect, Plaintiffs have collected observations about
their trucks’ decline in fuel economy. Those observations are

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RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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“unreimbursed fuel costs” he incurred when his truck broke offenses. This they fail to do. The RICO claims will be
down 250 miles from home. ECF No. 17, PageID.2505. dismissed for failure to state a claim.

The only Plaintiff who makes no allegations about an injury To successfully plead a RICO claim under 18 U.S.C. §
he suffered as a result of the flash defect is Gary Gaster. 1962(c) Plaintiffs must allege that FCA and Cummins
He does not allege that his trucks were ever “flashed,” and participated, directly or indirectly, in (1) the conduct (2) of
does not say that he sustained any injury in connection an enterprise that affects interstate commerce (3) through
with the flash defect. See ECF No. 17, PageID.2499–2502. a pattern (4) of racketeering activity. Counts II, 2018 WL
Accordingly, Gaster lacks standing to pursue claims related 5264194 at *3 (citing Heinrich v. Waiting Angels Adoption
to the flash defect. Servs., Inc., 668 F.3d 393, 404 (6th Cir. 2012)).

Although Plaintiffs do not explain how or when they Demonstrating the existence of a RICO “enterprise” requires
measured the fuel economy of their vehicles after they showing that the defendants were “a continuing unit that
were “flashed,” or how, if at all, they compared the trucks’ functions with a common purpose.” Ouwinga v. Benistar
post-“flashing” fuel economy to the their pre-“flashing” fuel 419 Plan Servs., Inc., 694 F.3d 783, 794 (6th Cir. 2012)
economy, the Court finds that they—with the exception of (quoting Boyle v. United States, 556 U.S. 938, 948 (2009)).
Gaster—have alleged a non-speculative injury fairly traceable “Racketeering activity” in turn means one of the acts
to the flash defect, and redressable by this Court. See Lujan, indictable under the federal statutes enumerated in 18 U.S.C.
504 U.S. at 560– 61. That is enough to survive a motion to § 1961(1)(B). Among the enumerated statutory offenses are
dismiss. mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C.
§ 1343, which are the two predicate offenses Plaintiffs
As support for the flash defect, Plaintiffs also rely on allege here. Establishing a “pattern” of “racketeering activity”
comments by one mechanic who allegedly said, “I will deny entails alleging that FCA and Cummins each engaged in two
this later, but I can tell you that the ECM updates [i.e. or more predicate acts of such conduct—that is, two acts of
“flashing”] are diverting fuel into the exhaust system to make mail or wire fraud. See Kerrigan v. ViSalus, Inc., 112 F. Supp.
it burn hotter so that it reduces the amount of emissions 3d 580, 605 (E.D. Mich. 2015). Plaintiffs must also fulfill
leaving the tailpipe.” ECF No. 17, PageID.2489. The same RICO’s statutory standing requirements, which require them
mechanic apparently said that “upwards of 25%” of the to plausibly allege (1) an injury to “business or property,”
trucks’ fuel was being diverted through the exhaust system to that is (2) “by reason of violation of section 1962.” 18 U.S.C.
heat up the emissions because of the flash defect. ECF No. 17, § 1964(c). The injury to “business or property” must be
PageID.2490. No information is provided about the identity “concrete” rather than speculative or tangible. Counts II, 2018
of this mechanic, the FCA dealership where he worked, or WL 5264194 at *3 (citing Saro v. Brown, 11 F. App’x 387,
the date on which he made these comments. Taking all the 389 (6th Cir. 2001)).
allegations in the Amended Complaint as true, however, the
Court finds that it sufficiently alleges the existence of the flash
defect and a cognizable injury relating to that defect in the A. Plaintiffs have established a RICO injury created by
2013–2016 trucks. the washcoat defect in 2013–2015 model year vehicles,
and the flash defect in 2013–2016 vehicles.
Plaintiffs have alleged facts establishing an injury to business
III. Plaintiffs fail to state a claim for violation of RICO. or property. The premium Plaintiffs say they paid for the
*12 In reviewing the Amended Complaint’s factual trucks under the misapprehension that they were lower-
allegations, it is clear this case is not an appropriate vehicle emitting and had better fuel economy and other qualities
for a civil RICO action. Although Plaintiffs have pled a superior to similar gas vehicles satisfies RICO’s injury
cognizable injury under the RICO Act by alleging that they requirement.
overpaid for the trucks at the point of purchase because of the
washcoat defect and the flash defect, they have not adequately Sixth Circuit precedent allows Plaintiffs to demonstrate a
pled the existence of a common enterprise between FCA and cognizable RICO injury using overpayment theory. In Reiter
Cummins, or the required state of mind for a RICO claim. v. Sonotone
Plaintiffs must allege the Defendants acted with the requisite
scienter to support their allegations about the predicate fraud

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RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
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as Plaintiffs allege here, is a cognizable RICO injury where

Corporation, a case involving § 4 of the Clayton Act, the plaintiffs allege that the defect is current—rather than latent
Supreme Court found the plaintiff’s allegation that she had —and affects all class vehicles.
purchased a hearing aid at a price artificially inflated by the
defendants’ anticompetitive conduct sufficient to allege an Like in Duramax and Counts II, cases decided in this district,
injury to property. 442 U.S. 330, 337 (1979). Like RICO, the premium Plaintiffs paid for the trucks, which they assert
the Clayton Act authorizes any person who suffers an injury did not function as advertised, was also “determinable” at
to “business or property” because of an antitrust violation the point of purchase rather than contingent on “the vagaries
to file suit. Id. Although Reiter was not a RICO case, the of the free market” or some other speculative event. In re
Sixth Circuit has observed that the opinion’s “common-sense Duramax Diesel Litig., 298 F. Supp. 3d at 1072. See Gamboa,
observation about § 4 applies with equal logical force to § 381 F. Supp. 3d at 878. Cf. Counts II, 2018 WL 5264194 at *4
1964(c),” the civil RICO statute. Jackson v. Sedgwick Claims (explaining that damages such as “future attempted repairs,
Mgnmt. Servs., Inc., 731 F. 3d 556, 564 (6th Cir. 2013). future costs, and diminished future performance for value” are
Courts in this district considering RICO standing in similar “too speculative” to constitute a RICO injury.). Plaintiffs have
auto cases have approved the overpayment theory of damages thus established a cognizable RICO injury in connection with
advanced by Plaintiffs. The Duramax court was satisfied with the washcoat defect in the 2013–2015 trucks and the flash
plaintiffs’ contention that they had paid a premium of nearly defect in the 2013–2016 trucks.
$9,000 for a diesel (rather than gas) car because of General
Motors’s allegedly fraudulent conduct. The court found that
allegation enough to state a “cognizable out-of-pocket injury”
traceable to the allegedly defective product. 298 F. Supp. 3d at B. Plaintiffs have not plausibly alleged that
1071–72. Similarly, in Counts II another court in this district FCA and Cummins shared a common purpose.
found the plaintiffs had established a RICO injury where they
The Amended Complaint’s factual allegations do not,
claimed to have paid a premium of $2,400 to purchase a diesel
however, support the existence of a “common purpose”
truck without receiving the benefit of their bargain. 2018 WL
shared by FCA and Cummins. Stating a RICO claim requires
5264194 at *4. The trucks’ value, plaintiffs alleged, had been
Plaintiffs to plausibly allege that the enterprise members who
inflated by the defendant’s allegedly fraudulent conduct. 2018
engaged in a pattern of racketeering activity were united in a
WL 5264194 at *4. See In re Chrysler-Dodge-Jeep Litig.,
“common purpose.” 18 U.S.C. § 1962(c). See United States
295 F. Supp. 3d at 959 (holding that overpayment because of
v. Turkette, 452 U.S .576, 583 (1981). Unlike a defeat-device
deceptive conduct states a RICO injury); In re Volkswagen
case, where the common purpose of designing, marketing,
“Clean Diesel” Marketing, Sales Practices, & Prods. Liab.
and selling an engine or car with such a device installed is
Litig., 349 F. Supp. 3d 881 (N.D. Cal. 2018) (holding that
inherently deceptive, the allegations concerning the washcoat
plaintiffs who allegedly overpaid to lease class vehicles by
defect and flash defect establish nothing more than a business
paying a premium for something they did not receive stated a
relationship. Plaintiffs’ claim that FCA and Cummins were
RICO injury to “business or property”).
participating in the washcoat and flash enterprises together
thus falls short of pleading a common unlawful purpose.
*13 Unlike the plaintiffs in In re: General Motors LLC
Ignition Switch Litigation, No. 14-MD-2543, 14-MC-2543,
Courts have “overwhelmingly” rejected efforts to
2016 WL 39020353 (S.D.N.Y. Jul. 15, 2016), which
characterize ordinary business relationships as RICO
Defendants rely on, the Plaintiffs in this case allege the
enterprises. Gomez v. Guthy-Renker, LLC, No. EDCV
class vehicles are currently defective because they emit more
14-01425 JGB, 2015 WL 4270042, at *8 (C.D. Cal. Jul.
NOx than a reasonable consumer would expect (the washcoat
13, 2015) (collecting cases). See Wuliger v. Liberty Bank,
defect), and underperform on fuel economy and other tasks
N.A., No. 3:02 CV 1378, 2004 WL 3377416, at *9 (N.D.
(the flash defect) in comparison to what Plaintiffs reasonably
Ohio Mar. 4, 2004) (“Participation in a business relationship
expected based on Defendants’ representations. See In re
without more does not equate to liability under § 1962(c).”);
Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, &
Javitch v. Capwill, 284 F. Supp. 2d 848, 856–57 (N.D. Oh.
Prods. Liab. Litig., 295 F. Supp. 3d at 964 (distinguishing
2003) (same). To that end, several courts have distinguished
cases alleging speculative, latent defects from those in which
between factual scenarios where the enterprise’s common
plaintiffs allege that a defect is currently present in all class
purpose was “to create, market, and sell...[an] inherently
vehicles). Overpayment for a vehicle at the point of purchase,

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3198 Page 48 of 55

deceptive” product, and those in which parties engaged in a Plaintiffs have not adequately pled the existence of the
typical business relationship. Duramax, 298 F. Supp. 3d at washcoat or flash enterprise because they do not provide
1080 n.25. specific allegations of a shared purpose between FCA
and Cummins. The washcoat defect is not an inherently
For example, in Shaw v. Nissan North America, Inc., 220 deceptive product, as compared to the defeat devices
F. Supp. 3d 1046, 1054 (C.D. Cal. 2016), the plaintiffs involved in Duramax, Bledsoe I & II, and numerous similar
alleged that defendants had participated in an enterprise cases. Plaintiffs’ allegations about FCA and Cummins’s
“for the purpose of concealing the scope and nature of shared purpose involving the flash enterprise are similarly
the...defects in order to sell more Subject Nissan Vehicles” inadequate. They provide no specific allegations about how
with the additional shared purpose of “maximiz[ing] the FCA and Cummins would have known about the flash
revenue and profitability” through their design, manufacture, defect at the time Cummins filed COC and EO applications,
distribution, and testing the defective vehicles. The Shaw or how the Defendants’ behavior evidences a “common
defendants, according to the plaintiffs, continued to sell purpose” of concealing the flash defect from consumers.
the class vehicles despite their awareness of the alleged Further, Plaintiffs do not specifically allege that FCA and
defect. Id. Yet in that case the court found no common Cummins designed, manufactured, marketed, and sold the
purpose, “much less a fraudulent one.” Id. at 1057. Rather, trucks with a common purpose of misleading regulators and
the allegations demonstrated only that the parties were the public. Rather, Plaintiffs generally describe the process
“associated in a manner directly related to their own primary through which FCA and Cummins interacted in designing and
business activities.” Id. at 1057. That the defendants at times manufacturing the trucks containing Cummins engines, and
reached “independent conclusions” about which remedial the process of obtaining COCs and EOs. This is consistent
measures to take in response to discovery of the defect further with the ordinary course of a business relationship between
swayed the court in favor of finding that plaintiffs had failed a supplier and manufacturer and cannot by itself establish
to plead the existence of a RICO enterprise with a common a “common purpose” worthy of a RICO enterprise. See
purpose. See id. Duramax, 298 F. Supp. 3d at 1080 n.25.

*14 The Amended Complaint in this case describes Moreover, Plaintiffs allege that FCA and Cummins became
two separate RICO enterprises that FCA and Cummins aware of the washcoat defect only “as early as September
allegedly participated in: the “washcoat enterprise”; and the 2014,” after FCA began receiving an increasing number
“flash enterprise.” The purpose of the washcoat enterprise, of related warranty claims. ECF No. 17, PageID.2481–82.
according to Plaintiffs, was for FCA and Cummins to Accordingly, any joint enterprise involving the washcoat
continue profiting from sales of the trucks while omitting defect could not have existed prior to September 2014.
disclosure of the washcoat defect to regulators and the Plaintiffs also acknowledge that Cummins quickly began
public and continuing to market the trucks as compliant conducting emissions testing on the trucks and, after
with emissions standards, “clean,” and “the lowest emitting identifying a potential problem, promptly notified the EPA of
diesel engine ever produced.” ECF No. 17, PageID.2587. a possible emissions defect in March 2015. ECF No. 36-1,
The flash enterprise was allegedly informed by FCA and PageID.5675. Plaintiffs imply that the delay between the
Cummins’s shared purpose of designing a defective truck initial discovery of the defect “as early as September 2014”
that would initially pass emissions standards but break down and the EPA’s 2018 announcement of the recall is indicative
over time. ECF No. 17, PageID.2487. This, Plaintiffs allege, of a RICO enterprise that united FCA and Cummins in a
would necessitate that FCA dealerships “flash” the trucks’ common purpose. Yet the Amended Complaint also describes
Electronic Control Modules to divert more fuel to the DPF to FCA and Cummins as being in total disagreement about
burn off soot, passing on costs to the consumer by diminishing which party was financially and logistically responsible for
the trucks’ fuel economy by approximately 25%. ECF No. the washcoat recall from at least early 2015 through 2018.
17, PageID.2587. An additional purpose of both enterprises, See ECF No. 17, PageID.2481–82. The fact that FCA and
Plaintiffs claim, was misrepresenting or omitting information Cummins were in opposition to one another concerning
about the trucks’ emissions levels to the EPA and CARB for allocating responsibility for the recall substantially undercuts
the purpose of obtaining COCs and EOs. See ECF No. 17, the conclusion that they were operating to further the
PageID.2589, 2592–93. “common purpose” of the purported washcoat enterprise.

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3199 Page 49 of 55

Plaintiffs’ RICO claims must be dismissed because they In re Volkswagen “Clean Diesel” Mktg, Sales Practices &
have not specifically pled a “common purpose” uniting FCA Prods. Liab. Litig., MDL No. 2672 CRB, 2017 WL 4890594,
and Cummins in the washcoat or flash enterprises. The at *15 (N.D. Cal. Oct. 30, 2017). In Duramax and Counts
Court is similarly unconvinced that the Amended Complaint II, courts in this district found specific allegations of a defeat
adequately alleges the existence of separate single-entity device indicative of “inherently deceptive” intent sufficient
enterprises by FCA and Cummins in connection with either to demonstrate “specific intent to defraud.” See Duramax,
defect. 298 F. Supp. 3d at 1083; Counts I, 2018 WL 5264194 at
*7. See also In re Chrysler-Dodge-Jeep Ecodiesel Mktg.,
Sales Practices, & Prods. Liab. Litig., 295 F. Supp. 3d at
C. Plaintiffs have not adequately pled the scienter 977 (inferring specific intent to defraud from allegations of
necessary to support predicate offenses. a defeat device because the defeat devices have a “deceitful
*15 An additional basis for dismissal of the RICO claims purpose.”); In re Volkswagen “Clean Diesel” Mktg, Sales
is Plaintiffs’ failure to adequately plead a “specific intent to Practices & Prods. Liab. Litig., 2017 WL 4890594 at *15
defraud.” The predicate RICO acts identified by Plaintiffs are (finding intent to defraud based on manufacturer’s use of a
mail and wire fraud. 18 U.S.C. §§ 1341, 1343. According to defeat device).
Plaintiffs, FCA and Cummins engaged in mail and wire fraud
by using the United States mail and wires for the purpose As has been stated, this is not a defeat-device case, nor do
of carrying out unlawful schemes to design, manufacture, the facts as pled establish that the washcoat or flash defects
market, and sell defective trucks to consumers by making are indicative of malintent on the part of FCA or Cummins
misrepresentations and omissions. in the way that defeat devices are widely understood to
be. Accordingly, the Court does not immediately infer
To state a claim for mail or wire fraud, Plaintiffs must allege any specific intent to defraud on the part of FCA or
the following elements: “(1) devising or intending to devise Cummins. The Sixth Circuit has stated that specific intent to
a scheme to defraud (or to perform fraudulent acts); (2) defraud or deceive exists only “if the defendant by material
involving the use of the mails; (3) for the purpose of executing misrepresentations intends the victim to accept a substantial
the scheme or attempting to do so.” United States v. Kennedy, risk that otherwise would not have been taken.” United
714 F.3d 951, 958 (6th Cir. 2013). The “scheme to defraud” States v. Daniel, 329 F.3d 480, 487 (6th Cir. 2003). For
must involve “misrepresentations or omissions reasonably example, in Miller v. General Motors, LLC another court in
calculated to deceive persons of ordinary prudence and this district considered too conclusory allegations that “GM
comprehension.” Bender, 749 F.2d at 1216 (quoting Van failed to disclose the [defect]” and “GM was aware of the
Dyke, 605 F.2d at 225). Sixth Circuit precedent further [defect]...when it marketed and sold the Class Vehicles.”
requires that Plaintiffs allege FCA and Cummins each had the 2018 WL 2740240, at *13 (E.D. Mich. June 7, 2018).
“specific intent to deceive or defraud.” United States v. Frost, Such statements, the court held, were “plainly insufficient to
125 F.3d 346, 354 (6th Cir. 1997)). Although Plaintiffs need establish knowledge” of the defect even under Rule 8’s less
not allege “actual reliance,” they must plausibly claim that stringent pleading standard. Id. Plaintiffs’ allegations about
the misrepresentations or omissions were “material.” United FCA and Cummins’s specific intent to defraud are similarly
States v. Daniel, 329 F.3d 480, 487 (6th Cir. 2003). conclusory.

Plaintiffs have not sufficiently alleged that FCA and *16 Plaintiffs allege that the gap between FCA and
Cummins each acted with “specific intent to defraud.” The Cummins allegedly becoming aware of the washcoat defect
distinction between cases involving a defeat device and those “as early as September 2014” and commencement of the
arising from an alleged defect such as the washcoat defect is recall in 2018 establishes a specific intent to defraud on the
salient here. In defeat-device cases, courts have reasonably part of Defendants. Among the other allegations Plaintiffs
inferred a specific intent to defraud from the nature of the make regarding intent to defraud are that Defendants must
defeat-device scheme itself. As expressed by a court in have known about the washcoat defect “from the beginning,
the Northern District of California, “[n]o one to date...has because they would have been required to test the Trucks for
sought to justify, or explain a lawful purpose for, software their useful life, and the [defect] would have manifested itself
that effectively turns a vehicle’s emission systems on or off during these tests.” ECF No. 17, PageID.2561 (emphasis
depending on whether the vehicle is undergoing emissions added). Concerning the flash defect, Plaintiffs somewhat
testing or being operated under normal driving conditions.”

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3200 Page 50 of 55

vaguely assert, “Defendants also knew about the Flash Some of Plaintiffs’ state-law fraud and consumer-protection
Defect for the same reason.” ECF No. 17, PageID.2561. claims fall short of Rule 9(b)’s heightened pleading standard
These allegations about Defendants’ intent to defraud are while others just meet it. See Miller, 2018 WL 2740240 at
distinctively lacking in particularity. *14 (explaining that Rule 9(b) applies to state consumer-
protection claims that sound in fraud). In contrast, Plaintiffs’
Although Rule 9(b) permits that “[m]alice, intent, [and] breach of contract claims are insufficiently pled because they
knowledge...may be alleged generally,” Sixth Circuit do not specifically allege that there was ever any contract
jurisprudence demands that plaintiffs at least allege the between either FCA or Cummins and the Plaintiffs, or
defendant “possesses the specific intent to deceive or what specific provision Defendants allegedly breached. As
defraud.” Frost, 125 F.3d at 354. To say, as the Amended to Plaintiffs’ unjust enrichment claims, the Court will allow
Complaint does, that Cummins and FCA simply “must have some to move forward, while others will be dismissed.
known” about the washcoat defect based on their useful-life
testing is too speculative a foundation on which to support As stated, the enormous Amended Complaint asserts claims
an inference that they specifically intended (through their against FCA and Cummins under the laws of 18 states
allegedly material misrepresentations) to cause Plaintiffs to (Michigan, Alabama, California, Colorado, Florida, Georgia,
purchase defective trucks. Because pleading the requisite Idaho, Kentucky, Mississippi, New Jersey, North Carolina,
scienter is essential to stating a claim for the predicate RICO Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and
offenses of mail and wire fraud, Plaintiffs’ failure to allege a Washington). Yet they make little effort to support the validity
“specific intent to defraud” is fatal to their RICO claims. of their fraudulent concealment, consumer protection, breach
of contract, or unjust enrichment claims on a state-specific
basis. Courts are not responsible for sua sponte raising
IV. Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et and resolving legal questions not sufficiently briefed by the
seq. parties. Counts I, 237 F. Supp. 3d at 594. Nonetheless, the
Plaintiffs’ claims under MMWA, 15 U.S.C. § 2301, also Court has thoroughly considered Plaintiffs’ state-law claims
cannot stand because Plaintiffs have not alleged underlying and will allow some of them to proceed past the motion-to-
state-law warranty claims. The MMWA creates a private dismiss phase..
right of action for consumers injured by the failure of a
supplier, warrantor, or service contractor to comply with its
obligations under a written or implied warranty, or service A. Fraudulent misrepresentation, omission, and
contract. 15 U.S.C. § 2310(d)(1). But the statute serves only consumer-protection statues
to “supplement” state-law implied warranties by prohibiting *17 Sixth Circuit precedent demands that claims for
their disclaimer in certain circumstances and providing a affirmative misrepresentations: “(1) specify the statements
federal remedy for their breach. Rokicsak v. Colony Marine that the plaintiff contends were fraudulent, (2) identify the
Sales & Serv., Inc., 219 F. Supp. 2d 810, 817 (E.D. Mich. speaker, (3) state where and when the statements were made,
2002) (quoting Richardson v. Palm Harbor Homes, Inc., and (4) explain why the statements were fraudulent.” Frank,
254 F.3d 1321, 1325–26 (11th Cir. 2001)). A claim under 547 F.3d at 569. For claims involving fraudulent omissions,
the MMWA is therefore derivative of and “relies on the Rule 9(b) requires that Plaintiffs plead “the who, what, when,
underlying state law claim.” Johansson v. Cent. Garden & Pet where, and how” of the alleged omission. Republic Bank & Tr.
Co., 804 F. Supp. 2d 257, 265 (D. N.J. 2011) (citing Bailey v. Co. v. Bear Sterns & Co., 683 F.3d 239, 256 (6th Cir. 2012).
Monaco Coach Corp., 350 F. Supp. 2d 1036, 1040 (N.D. Ga. Specifically, a plaintiff must alleged “(1) precisely what was
2004)). This court has previously dismissed MMWA claims omitted; (2) who should have made the representation; (3) the
where the plaintiffs have not alleged any underlying state-law content of the alleged omission and the manner in which the
warranty claims. Bledsoe II, 378 F. Supp. 3d at 650. Plaintiffs omission was misleading; and (4) what [defendant] obtained
have not convinced this Court it should rule differently under as a consequence of the alleged fraud.” Id. Stating a claim for
the facts of this case and in fact have agree to dismissal of fraudulent omission also requires pleading a duty to disclose.
their MMWA claims. See ECF No. 39, PageID.5789. MacDonald v. Thomas M. Cooley Law Sch., 724 F.3d 654,
665 (6th Cir. 2013).

V. Plaintiffs have adequately pled some of their state-law

claims.

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3201 Page 51 of 55

to last for years” are general and nonquantifiable. The Court

i. Plaintiffs have to some extent stated claims for therefore considers them nonactionable puffery.
fraudulent misrepresentation.
The Court will first consider Plaintiffs’ claims for affirmative The only statements referenced by Plaintiffs that initially
misrepresentation. The Amended Complaint includes a appear actionable are those by Cummins claiming that
compilation of statements by FCA, and by Cummins, that the company offers “[t]he smart way to get 3–6% better
Plaintiffs cast as misrepresentations. See ECF No. 17, fuel economy,” that the “6.7L Turbo Diesel produces an
PageID.2553–57. Those statements, pulled from Cummins’s additional 15 lb.-ft of torque, while maintaining performance
and FCA’s sales brochures, news releases, YouTube videos, and EPA compliance,” and the “Cummins after-treatment
includes claims that Cummins offers “leading fuel economy system allows your truck to comply with federal laws
for a lower cost of operation”; “environmentally clean governing exhaust emissions....” ECF No. 17, PageID.2553–
engines”; “ultra low emissions systems”; and “compl[iance] 55. On further inspection, however, the claim about “3–6%
with federal laws covering exhaust emissions.” Id. at better fuel economy” in the Cummins brochure pertains to
PageID.2553–55. Among the statements Plaintiffs point to as the SmartAdvantage Powertrain, which Plaintiffs have not
misrepresentations by FCA are its assertions that the trucks alleged has anything to do with the trucks’ SCR or DPF. See
“are part of the low-cost of ownership equation”; “built ECF No. 17-20, PageID.4577 (“Top 10 Ways Cummins is
to last for years”; “green by design”; and “fully compliant Redefining Value” Brochure). It also begs the question, 3–6%
with recent federal mandates.” Id. at 2555–56. Although better fuel economy than what? And Cummins’s statements
Plaintiffs have specifically pled the “what,” “who,” “when,” about the 6.7L Turbo Diesel’s 15 lb.-ft of torque, which relates
and “where” of these statements, and—considering their to the 2015 trucks, cannot create a basis for Plaintiffs’ fraud
pleading as a whole—that those statements were generally claims because they have not alleged that the statement is
false, many of the statements are non-actionable puffery. false. See Frank, 547 F.3d at 569 (explaining that to plead
fraudulent misrepresentation, the plaintiff must plead that the
“Inherently subjective” statements cannot form the basis of statement at issue was false).
a fraud action. Counts I, 237 F. Supp. 3d at 598. Statements
about the cleanliness of an engine or emissions system, for *18 The statement that the “Cummins after-treatment
example, “clean diesel,” have been categorized by courts— system allows your truck to comply with federal laws
including this one—as puffery, as have claims that a vehicle governing exhaust emissions” is, however, actionable. CAA
is “efficient” or “reliable.” Id.; Gamboa, 381 F. Supp. 3d at preemption does not apply because Plaintiffs are taking
875; Bledsoe II, 378 F. Supp. 3d at 648–650; Ram Int’l Inc. issue with Cummins’s alleged misrepresentation about the
v. ADT Sec. Servs., Inc., No. 11-10259, 2011 WL 5244936, trucks’ emissions, not with the mere fact that the trucks
at *6 (E.D. Mich. Nov. 3, 2011). In contrast, this Court do not meet federal emissions standards. Likewise, FCA’s
held in Bledsoe II that “statements that the trucks meet an statement that the Cummins engine used in the 2013 trucks
ascertainable and quantifiable standard for fuel efficiency has an SCR system “that’s fully compliant with recent
and emissions set in place by a third-party regulator...rise federal mandates,” likewise appears actionable. ECF No. 17,
above nonactionable puffery.” 378 F. Supp. 3d at 649. PageID.2556. Plaintiffs’ affirmative misrepresentation claims
For example, quantifiable promises such as “meeting the rooted in these two statements by FCA and Cummins are thus
2010 emissions standards three years early” were deemed sufficient to survive the motions to dismiss.
actionable representations. Id. at 649. Generally speaking, the
more general the assertion, the more likely it is to be identified
as puffery. Counts I, 237 F. Supp. 3d at 597. Similarly, ii. Plaintiffs have adequately pled state-law claims for
statements that make “specific representations, especially fraudulent omission.
numerically quantifiable representations,” are more likely to Turning to Plaintiffs’ claims for fraudulent omission, each
be considered actionable. Id. of the state laws under which Plaintiffs assert claims require
knowledge of the defect by the defendant, or at least
Here, the representations Plaintiffs highlight by FCA an allegation that the defendant should have discovered
and Cummins are almost all easily categorized as the defect. See Wozniak, 2019 WL 108845, at *4 n.5
nonactionable puffery. Statements such as “leading fuel (providing citations for the relevant state laws of Alabama,
economy,” “unprecedented performance and fuel economy,” California, Colorado, Florida, Idaho, Kentucky, Michigan,
“environmentally clean,” “low-cost of ownership” and “built New Jersey, North Carolina, Ohio, Pennsylvania, Texas,

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Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3202 Page 52 of 55

Utah, and Virginia). 4 Defendants urge that Plaintiffs’ fraud- 2020) (Leitman, J.), the court found “too vague” and at “too
based claims fail as a matter of law because they provide only high a level of generality” allegations that:
conclusory allegations about Defendants’ knowledge of the
*19 “as early as 2007, if not before, Defendant
washcoat and flash defects. The Court agrees.
acquired its knowledge of the [defect] though sources
not available to Plaintiffs...including, but not limited
4 The other states’ laws Plaintiffs assert fraudulent to, pre-production testing, pre-production design failure
omission claims under (Georgia, Mississippi, Oklahoma, mode and analysis data, production design failure mode
and Washington) also require specific allegations of
and analysis data, early consumer complaints made
knowledge on the part of the defendant. See Sun
exclusively to Defendants’ network of dealers and directly
Nurseries, Inc. v. Lake Erma, LLC, 730 S.E.2d 556, 561
to Defendant...testing conducted by Defendant in response
(Ga. Ct. App. 2012); Lacey v. Morrison, 906 So. 2d 126,
129 (Miss. Ct. App. 2004); Gish v. ECI Servs. of Okla.,
to consumer complaints, and repair order and parts data
Inc., 162 P.3d 223, 228 (Okla. Civ. App. 2006); Adams v. received by Defendant from Defendant’s network of
King Cty., 192 P.3d 891, 902 (Wash. 2008). dealers.”

Courts considering fraudulent omission claims have found

Courts routinely reject generalized allegations about ‘testing’
it insufficient under Rule 8 for plaintiffs to allege, in a
and manufacturer ‘analyses’ made in support of finding
conclusory manner, only that the manufacturer knew of a
knowledge of a defect.” McKee, 376 F. Supp. 3d at 761 (citing
defect in the vehicle it sold them and failed to disclose
that defect to plaintiffs before they purchased the vehicle. Beck, 273 F. Supp. 3d at 753). 5 For example, in McKee v.
For example, in Miller v. General Motors, LLC, 2018 WL General Motors, LLC, the court found that allegations by
2740240 at *13, the district court found plaintiffs’ allegations plaintiffs that General Motors should have known about the
that “GM failed to disclose the Power Liftgate Defect to transmission defect at issue based on testing it conducted
[Plaintiff] before she purchased her vehicle, despite GM’s in bringing the vehicles to market fell short of stating a
knowledge of the defect” and that “GM was aware of the claim. McKee, 376 F. Supp. 3d at 761, Similarly, allegations
Power Liftgate Defect within the Class Vehicles when it about complaints consumers made about the defect to the
marketed and sold the Class Vehicles” clearly insufficient National Highway and Traffic Safety Administration were
to establish knowledge even under Rule 8’s liberal pleading found to have no bearing on General Motors’s knowledge of
standard. Considered similarly insufficient by the Miller court the defect. Id. Similarly, in Grodzitsky v. Am. Honda Motor
were allegations that General Motors had known about the Co., Inc., No. 2:12-cv-1142-SVW-PLA, 2013 WL 690822, at
defect “since at least 2010,” when it first issued technical *6 (C.D. Cal. Feb. 19, 2013), the court dismissed fraud claims
service bulletins about the problem, and that it “likely had where the plaintiffs made only “generalized” assertions that
notice and knowledge of the defect prior to 2010” based on unspecified pre-release testing data and aggregate data from
recalls by other auto manufacturers who used liftgate struts Honda dealers should have made the manufacturer aware of
from the same supplier. Id. the defect.

Allegations that a manufacturer “knew, or should have 5 McKee applied Beck’s analysis of what is required to
known” about a defect based on “pre-production testing, pre- plead exclusive knowledge in the fraudulent omission
production design failure mode effects analysis, production context to assessing whether plaintiffs specifically pled
design failure mode effects analysis, early consumer knowledge more generally. McKee, 376 F. Supp. 3d at
complaint[s] made to [the manufacturer’s] network of 761 n.13 (citing Beck, 273 F. Supp. 3d at 753).
exclusive dealers and NHTSA [National Highway and Traffic Considering relevant precedent, to adequately plead
Safety Administration]” have also been found generally fraudulent omission Plaintiffs must allege that Defendants
insufficient to support an inference that the defendant knew knew at the time they sold the trucks that the washcoat defect
about a defect at the time it sold the car. Beck, 273 F. Supp. and flash defect caused the trucks’ aftertreatment system and
3d at 753 (collecting cases). fuel economy to be less effective than a reasonable consumer
would have expected given Defendants’ representations
In yet another case in this district, Hall v. General Motors, about the trucks..See Miller, 2018 WL 2740240 at *14 (citing
LLC, No. 19-cv-10186, 2020 WL 1285636, at *3 (E.D. Mich. Cataldo v. U.S. Steel Corp., 676 F.3d 542, 551 (6th Cir.
2012)).

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 16

Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3203 Page 53 of 55

law that a party can only advance a claim of breach of written

The Amended Complaint’s allegations are plainly insufficient contract by identifying and presenting the actual terms of
to establish FCA’s or Cummins’s knowledge of the washcoat the contract allegedly breached.” Northampton Restaurant
defect in 2013– 2015 trucks and the flash defect in 2013– Grp., Inc. v. FirstMerit Bank, N.A., 492 F. App’x 518,
2016 trucks. The pleading alleges that FCA and Cummins 522 (2012) (citation omitted). Plaintiffs have not met that
became aware of the washcoat defect “as early as September threshold here. They have not identified any agreement that
2014” and suggests the Court should infer knowledge or existed between Plaintiffs and FCA or Cummins, let alone
malicious intent from the fact that the EPA-supervised any specific contract term that either Defendant breached.
recall did not begin until 2018. ECF No. 17, PageID.2485. Plaintiffs’ assertion that “[e]ach and every sale or lease of a
But Plaintiffs’ pleading also acknowledges that Cummins, Truck constitutes a contract between FCA and the purchaser
which held the COCs and EOs, began testing potentially or lessee” is unsupported by binding precedent. ECF No.
affected vehicles after FCA received an increasing number of 17, PageID.1659. Certainly, Plaintiffs have not alleged any
emissions-related warranty claims from customers in 2014. factual basis for finding a contract between Cummins and the
See ECF No. 17, PageID.2564–65, 2567–68. By March 2015, Plaintiffs. Plaintiffs’ breach-of-contract claims against both
a mere six months later, Cummins had completed its testing Defendants will be dismissed.
and submitted an Emissions Defect Information Report to
the EPA. ECF No. 17, PageID.2568. See ECF No. 36-1,
PageID.5675. C. Unjust enrichment
Claims for unjust enrichment by their nature seek equitable
Here, concerning the washcoat defect, Plaintiffs claim that relief. Although Plaintiffs have not gone out of their way to
Defendants must have known about the defect “from the provide the Court with statutory law or precedent from the
beginning, because they would have been required to test 18 states whose laws they assert unjust enrichment claims
the Trucks for their useful life, and the [defect] would under, the Court finds that Plaintiffs have largely carried their
have manifested itself during these tests.” ECF No. 17, burden of pleading specific facts that would entitle them to
PageID.2561 (emphasis added). Such allegations do not relief under unjust-enrichment law. The particular elements
warrant the inference that Defendants knew about the of unjust enrichment may vary somewhat from state to state,
washcoat defect when they sold the trucks. Similarly, but the essence of such a claim is that it requires plaintiffs to
when it comes to the flash defect, Plaintiffs’ even thinner allege facts showing that defendants “received a benefit and
assertions that “Defendants also knew about the Flash Defect under the circumstances of the case, retention of the benefit
for the same reason [as they knew about the washcoat would be unjust.” In re Auto. Parts Antitrust Litig., 29 F.
defect]” are insufficient to establish Defendants’ knowledge Supp. 3d 982, 1014 (E.D. Mich. 2014). Put another way, the
of the flash defect. ECF No. 17, PageID.2561. There are typical elements of a state-law claim for unjust enrichment
likewise no specific allegations in Plaintiffs’ pleading that are: (1) the plaintiff conferred a benefit upon the defendant;
Cummins participated in, or knew anything about, the “flash” (2) the defendant accepted the benefit; and (3) injustice would
reprogramming FCA dealerships were using to remedy issues occur if the defendant did not pay the plaintiff for the value
with the clogged DPF. Because the Amended Complaint does of the benefit. In re FCA US LLC Monostable Elec. Gearshift
not contain allegations about the Defendants’ knowledge of Litig., 280 F. Supp. 3d at 1007–08 (quoting In re Cardizem CD
the washcoat defect or flash defect sufficient to satisfy Rule Antitrust Litig., 105 F. Supp. 2d 618, 671 (E.D. Mich. 2000)).
8 or Rule 9(b), Plaintiffs’ state-law omission-based fraud
claims fail as a matter of law. Their state-law consumer In the Amended Complaint Plaintiffs allege, broadly, that
protection claims fail for the same reason, as Rules 8 and 9(b) FCA and Cummins convinced Plaintiffs to pay a premium
also apply to consumer-protection claims that sound in fraud. for vehicles that were higher-emitting and less fuel-efficient
Miller, 2018 WL 2740240 at *14. than they were led to believe by Defendants. That premium
was, according to Plaintiffs, unjustly retained by FCA and
Cummins.
B. Breach of contract
*20 Claims for breach of contract by their nature require the With the exception of Plaintiffs’ claims under California
existence of an underlying contract. Plaintiffs do not allege and Texas law, which do not recognize unjust enrichment
they were a party to any contract with Cummins or FCA. As as a cause of action, the factual allegations in the Amended
stated by the Sixth Circuit, “[i]t is a basic tenet of contract Complaint, taken as true, thus create a reasonable inference of

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 17

Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3204 Page 54 of 55

unjust enrichment, regardless of the pleading particularities enrichment, a plaintiff must establish that the defendant has
of applicable law in Alabama, Colorado, Florida, Georgia, received and retained a benefit from the plaintiff and inequity
Idaho, Kentucky, Michigan, Mississippi, New Jersey, North has resulted.”); Owens Corning v. R.J. Reynolds Tobacco Co.,
Carolina, Ohio, Oklahoma, Pennsylvania, Utah, Virginia, and 868 So.2d 331, 342 (Miss. 2004) (“Mississippi law provides
Washington. See Avis Rent A Car Sys., Inc. v. Heilman, that, in an action for unjust enrichment, the plaintiff need only
876 So.2d 1111, 1122–23 (Ala. 2002) (stating that under allege and show that the defendant holds money which in
Alabama law, “[t]o prevail on a claim of unjust enrichment, equity and good conscience belongs to the plaintiff”); VRG
the plaintiff must show that the “defendant holds money Corp. v. GKN Realty Corp., 641 A.2d 519, 526 (N.J. 1994)
which, in equity and good conscience, belongs to the plaintiff (“To establish unjust enrichment, a plaintiff must show both
or holds money which was improperly paid to the defendant that defendant received a benefit and that retention of that
because of mistake or fraud.”) (internal quotations and benefit without payment would be unjust.”); Norman v. Nash
emphasis omitted); Hill v. Roll Int’l Corp., 195 Cal. App. Johnson & Sons’ Farms, Inc., 537 S.E.2d 248, 266 (N.C.
4th 1295, 1307 (Cal. Ct. App. 2011) (“Unjust enrichment Ct. App. 2000) (“[A] plaintiff must allege that property or
is not a cause of action, just a restitution claim.”); Lewis benefits were conferred on a defendant under circumstances
v. Lewis, 189 P.3d 1134, 1141 (Colo. 2008) (“[A] party which give rise to a legal or equitable obligation on the
claiming unjust enrichment must prove that (1) the defendant part of the defendant to account for the benefits received
received a benefit (2) at the plaintiff’s expense (3) under but that the defendant has failed to make restitution for the
circumstances that would make it unjust for the defendant property or benefits.”); Hambleton v. R.G. Barry Corp., 465
to retain the benefit without commensurate compensation.”); N.E.2d 1298, 1302 (Ohio 1984) (explaining that to establish
Florida Power Corp. v. City of Winter Park, 887 So.2d unjust enrichment under Ohio law, a plaintiff must alleged:
1237, 1241 n.4 (Fla. 2004) (“The elements of an unjust “(1) a benefit conferred by a plaintiff upon a defendant; (2)
enrichment claim are ‘a benefit conferred upon a defendant knowledge by the defendant of the benefit; and (3) retention
by the plaintiff, the defendant’s appreciation of the benefit, of the benefit by the defendant under circumstances where
and the defendant’s acceptance and retention of the benefit it would be unjust to do so without payment”.); Pope v.
under circumstances that make it inequitable for him to Fulton, 310 P.3d 1110, 1113 (Okla. Civ. App. 2013) (“Unjust
retain it without paying the value thereof.’ ”); Campbell v. enrichment arises when there is an expenditure by one person
Ailion, 790 S.Ed.2d 68, 73 (Ga. Ct. App. 2016) (“Thus, a that adds to the property of another, coupled with a resulting
claim for unjust enrichment exists where a plaintiff asserts injustice.”); Mitchell v. Moore, 729 A.2d 1200, 1203–04
that the defendant induced or encouraged the plaintiff to (Pa. Super. Ct. 1999) (“The elements necessary to prove
provide something of value to the defendant; that the plaintiff unjust enrichment are: (1) benefits conferred on defendant
provided a benefit to the defendant with the expectation that by plaintiff; (2) appreciation of such benefits by defendant;
the defendant would be responsible for the cost thereof; and and (3) acceptance and retention of such benefits under such
that the defendant knew of the benefit being bestowed upon circumstances that it would be inequitable for defendant
it by the plaintiff and either affirmatively chose to accept to retain the benefit without payment of value.”); Walker
the benefit or failed to reject it.”); Vanderford Co., Inc. v. v. Cotter Props., Inc., 181 S.W.3d 895, 900 (Tex. App.
Knudson, 165 P.3d 261, 272 (Idaho 2007) (“A prima facie 2006) (“Unjust enrichment is not an independent cause of
case of unjust enrichment consists of three elements: (1) there action but rather characterizes the result of failure to make
was a benefit conferred upon the defendant by the plaintiff; restitution of benefits either wrongfully or passively received
(2) appreciation by the defendant of such benefit; and (3) under circumstances which give rise to an implied or quasi-
acceptance of the benefit under circumstances that that would contractual obligation to repay.”), rev’d on other grounds,
be inequitable for the defendant to retain the benefit without 240 S.W.3d 869 (Tex. 2007); Desert Miriah, Inc. v. B & L
payment to the plaintiff for the value thereof.”); Jones v. Auto, Inc., 12 P.3d 580, 582 (Utah 2000) (explaining that
Sparks, 297 S.W.3d 73, 78 (Ky. Ct. App. 2009) (“For a party to establish unjust enrichment under Utah law, there must
to prevail under the theory of unjust enrichment, they must be: (1) “a benefit conferred on one person by another”; (2)
prove three elements: (1) benefit conferred upon defendant “the conferee must appreciate or have knowledge of the
at plaintiff’s expense; (2) resulting appreciation of benefit by benefit”; and (3) there must be “acceptance or retention by
defendant; and (3) inequitable retention of benefit without the conferee of the benefit under such circumstances as to
payment for its value”); Bowlers’ Alley, Inc., 32 F. Supp. make it inequitable for the conferee to retain the benefit
3d at 833 (“Under Michigan law, to plead a claim of unjust without payment of its value.”); James G. Davis Constr. Co.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 18

Case 2:19-cv-13429-PDB-DRG
JEREMY ECF
RAYMO, et al., Plaintiffs, v. FCA US LLCNo. 84-6
and..., filed (2020)
Slip Copy 08/03/20 PageID.3205 Page 55 of 55

DISMISSED WITHOUT PREJUDICE. Plaintiff’s unjust

v. FTJ, Inc., 841 S.E.2d 642, 650 (Va. 2020) (“We have
enrichment claims asserted under the laws of California
adopted a three-part test to govern unjust enrichment claims:
and Texas are DISMISSED WITH PREJUDICE. All
(1) the plaintiff conferred a benefit on the defendant; (2) the
of Plaintiffs’ state-law claims for fraudulent omission
defendant knew of the benefit and should reasonably have
against FCA and Cummins are DISMISSED WITHOUT
expected to repay the plaintiff; and (3) the defendant accepted
PREJUDICE. All of Plaintiffs’ claims against FCA and
or retained the benefit without paying for its value.”); W.H.
Cummins asserted under state consumer-protection statutes
Hughes, Jr., Co., Inc. v. Day, No. 65352-1-I, 2011 WL
are likewise DISMISSED WITHOUT PREJUDICE.
3278659, at *1 (Wash. Ct. App. 2011) (“Three elements
are necessary to establish a claim for unjust enrichment: (1)
The surviving claims are Plaintiffs’ claims for unjust
the defendant receives a benefit, (2) the received benefit is
enrichment under Alabama, Colorado, Florida, Georgia,
at the plaintiff’s expense, and (3) the circumstances make
Idaho, Kentucky, Michigan, Mississippi, New Jersey, North
it unjust for the defendant to retain the benefit without
Carolina, Ohio, Oklahoma, Pennsylvania, Utah, Virginia, and
payment.” (internal quotations omitted).
Washington state law. Likewise, Plaintiffs’ state-law claims
against FCA and Cummins for affirmative misrepresentation
*21 For these reasons, the Court finds that Plaintiffs have
all survive to the extent they do not rest on alleged
adequately stated claims for unjust enrichment under the laws
misrepresentations specifically found by the Court in this
of Alabama, Colorado, Florida, Georgia, Idaho, Kentucky,
Order to be puffery or otherwise non-actionable.
Michigan, Mississippi, New Jersey, North Carolina, Ohio,
Oklahoma, Pennsylvania, Utah, Virginia, and Washington
Plaintiffs lack standing to assert claims arising from the
(but not California or Texas).
alleged washcoat defect in the 2016 and 2017 model year
Dodge 2500 and 3500 Ram trucks with Cummins 6.7-
liter diesel engines. Their claims are thus DISMISSED
CONCLUSION WITHOUT PREJUDICE insofar as they involve the
alleged washcoat defect in the 2016 and 2017 trucks.
For these reasons, Defendant FCA US LLC’s motion to
dismiss (ECF No. 35) is GRANTED IN PART AND
Additionally, because Plaintiff Gary Gaster lacks standing
DENIED IN PART. Defendant Cummins, Inc.’s motion to
to pursue claims related to the flash defect, his claims are
dismiss (ECF No. 34) is also GRANTED IN PART AND
DISMISSED WITHOUT PREJUDICE to the extent they
DENIED IN PART.
are rooted in that alleged defect.

To summarize, as to Plaintiffs’ federal causes of action,

SO ORDERED.
their claims against FCA and Cummins for violation of
Dated: July 30, 2020 s/Terrence G. Berg
the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C. § 1962, are DISMISSED WITHOUT PREJUDICE.
Plaintiffs’ claims for violation of the Magnuson-Moss TERRENCE G. BERG
Warranty Act, 15 U.S.C. § 2301, by FCA and Cummins are
also DISMISSED WITHOUT PRREJUDICE. UNITED STATES DISTRICT JUDGE

All Citations
Turning to the state-law causes of action, all of Plaintiffs’
claims against FCA and Cummins for breach of contract are Slip Copy, 2020 WL 4366061

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government Works.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 19